Q.What is Money Supply ?

Money supply is the total stock of money held by the public at a point of time; the RBI measures it through the aggregates M1 to M4.

• Meaning: Money supply is the total amount of money available in an economy for transactions, held by the public (it excludes money held by the government and the banking system among themselves). It is a stock concept (measured at a point of time), not a flow.
• Measures used by the RBI:
  • M1 = currency with the public + demand deposits + other deposits with the RBI (narrow money).
  • M2 = M1 + savings deposits with post office savings banks.
  • M3 = M1 + time (fixed) deposits with commercial banks (broad money).
  • M4 = M3 + total post office deposits. …