UPSC Prelims 2002 · General Studies
Question 116: Economy and Social Development
Consider the following:
- 1.Currency with the public
- 2.Demand deposits with banks
- 3.Time deposits with banks
Which of these are included in Broad Money (M3) in India?
AnswerThe answer is (d).
Broad money, M3, includes currency with the public, demand deposits with banks, other deposits with the RBI and the time deposits of the banking system. So currency with the public, demand deposits and time deposits are all included. In short, M3 equals M1 plus time deposits with banks.
- 1. Currency with the public is part of M3.
- 2. Demand deposits with banks are part of M3.
- 3. Time deposits with banks are part of M3, and are what separates M3 from M1.
How you could have got this
- If you were sure statement 1 is correct, (c) goes: it leaves 1 out.
What you needed to know: Currency with the public is part of M3.
- Then, if you were sure statement 2 is correct, (b) goes: it leaves 2 out.
What you needed to know: Demand deposits with banks are part of M3.
- Then, if you were sure statement 3 is correct, (a) goes: it leaves 3 out.
What you needed to know: Time deposits with banks are part of M3, and are what separates M3 from M1.
Only (d) is left. This one needs every statement.
This follows an unofficial answer: UPSC has not published its key for this year, and if that answer is wrong, so is this path.
Which options go is worked out from UPSC’s key and the options, not by a model.
Why each option is right or wrong
- (a) Leaves out time deposits, which M3 includes.
- (b) Leaves out demand deposits, which M3 includes.
- (c) Leaves out currency with the public, which M3 includes.
- (d) Right: all three are included.
Explanation: written by UPSC Grade, not by UPSC.
Source: UPSC, Civil Services (Preliminary) Examination 2002, General Studies. UPSC's own paper isn't online; the words are from a published compilation. The paper on upsc.gov.in.