Which of the following options is the correct formula for the M0 measure of money supply, also known as 'reserve money'?

Question

Question

This question was previously asked in

UPMRC JE S&T 03 Jan 2023 Shift 2 Official Paper

M0 = Money in circulation + Bankers' deposits with RBI + Other deposits with RBI
M0 = Currency with the public + Demand deposits in banks + Other deposits in RBI + Post office savings Savings deposits of banks
M0 = Money with the public + Demand deposits in banks + Other deposits in RBI
M0 = Money with the public + Demand deposits in banks + Other deposits in RBI + Net fixed deposits of banks

Answer 1

The correct answer is M0 = Money in circulation + Bankers' deposits with RBI + Other deposits with RBI.

Key Points

M0 = Money in circulation + Bankers' deposits with RBI + Other deposits with RBI.
Money in Circulation: Includes currency notes and coins in the hands of the public.
Bankers' Deposits with RBI: Refers to the reserves held by commercial banks with the Reserve Bank of India.
Other Deposits with RBI: Includes the deposits held by other financial institutions and government bodies.
M0 Definition: M0 is the narrowest measure of money supply and includes the most liquid forms of money.
M0, M1, M2, and M3 are different classifications, with M0 being the most liquid form.
Reserve Money: Another name for M0, it reflects the base money controlled by the central bank.
Demand Deposits: Bank balances that are payable on demand, often used in M1 and M2 but not in M0.

Additional Information

RBI (Reserve Bank of India):
- Central banking institution in India responsible for monetary policy, currency issuance, and regulation of the banking sector.
- Established on April 1, 1935, under the Reserve Bank of India Act, 1934.
- Functions as the banker to the Government of India and performs essential banking services for the central and state governments.
- Formulates and implements monetary policy to control inflation, stabilize prices, and promote economic growth.