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Feb 2nd, 2022 - Daily Quiz
1. Gross domestic capital formation can be calculated as
(a) Gross Fixed Capital Formation + Inventory Investment
(b) Gross Business Fixed Investment + Gross Residential Construction Investment + Gross Public Investment + Inventory Investment
(c) Net Capital Formation + Consumption of Fixed Capital
(d) All the above
2. Barbell strategy that is in news refers to
(a) Biosphere conservation
(b) Removal of Space debris
(c) Reducing greenhouse gases
(d) None of these
3. What items are not included in M1 measure of supply?
(a) Currency and coins with public
(b) Inter-bank deposits
(c) Net Time Deposits with Banks
(d) Net demand deposits with banks
4. Which of the following is broad money?
(a) M1 + net demand deposits held by commercial banks
(b) M1 + Net time deposits of commercial banks
(c) M1 + Savings deposits with Post Office savings banks
(d) Currency (notes plus coins) + net demand deposits held by commercial banks
5. High powered money consists of
(a) Currency and coins held by the public
(b) Currency, cash reserves with banks and demand deposits
(c) Currency held by public and cash reserves with banks
(d) Currency and demand deposits
Answers
1 – d
2 – d
https://www.deccanherald.com/business/union-budget/what-is-barbell-strategy-1076522.html
3 – b
M1 = Currency and coins with Public + Demand Deposits of Commercial Banks + Other Deposits with RBI.
All the money held with the government, public, and the Reserve Bank of India (RBI) is known as the total stock of money. The money supply is that part of the total stock of money, which is with the public. It includes households, local authorities, firms, companies etc. Hence, public money does not include the money held by the government.
The money supply is the total value of money available in an economy at a point of time.
In India, Reserve Bank of India (RBI), measures the money supply and publishes it on a weekly or fortnight basis.
Monetary Aggregate
Monetary aggregates are the measures of the money supply in a country.
Very often, the money supply in the economy is represented using a monetary aggregate called ‘broad money’, also denoted as M3.
There are also different other monetary aggregates.
From 1977 to 1998, RBI used four monetary aggregates – M1, M2, M3 and M4 – to measure money supply. The central bank also used the concept of Reserve Money.
However, measuring standards changed in 1998.
Now, the nomenclature is M0, M1, M2, and M3.
To distinguish new aggregates from old aggregates, RBI sometimes mentions new aggregates as NM0, NM1, NM2, and NM3.
Old Monetary Aggregates
From 1977, RBI has been publishing four monetary aggregates – M1, M2, M3 and M4 – besides the reserve money.
In the new system, reserve money is named M0.
M2 and M4 that included post office savings banks deposits. However, these are not very widely used now.
New Monetary Aggregates
The RBI has started publishing a set of new monetary aggregates following the recommendations of the Working Group on Money Supply: Analytics and Methodology of Compilation (Chairman: Dr. Y.V. Reddy) which submitted its report in June 1998.
The Working Group recommended compilation of four monetary aggregates on the basis of the balance sheet of the banking sector in conformity with the norms of progressive liquidity:
Note: Demand Deposits include deposits in the Current Account and Savings Account (CASA). Term Deposits (or time deposits) include Fixed Deposits (FD) and Recurring Deposits (RD)
M1 is the most liquid and easiest for transactions whereas M4 is the least liquid of all. M3 is the most commonly used measure of the money supply. It is also known as aggregate monetary resources.
4 – b
5 – c
The total number of bank notes and coins in a country's monetary base is known as the high powered money in accordance to the theories of economics.
High powered money has no inclusion of demand deposits.
High powered money is the total liability of the monetary authority of the country because of this it includes currency held by the public and cash reserves with the bank.
As money is made up of currency and demand deposits, whereas high-powered money is comprises of currency and bank cash reserves.
- NM0 (monetary base)
- NM1 (narrow money)
- NM2
- NM3 (broad money)
- Currency in Circulation
- Bankers’ Deposits with RBI
- ‘Other’ Deposits with RBI
- Currency with the Public
- Current Deposits with the Banking System
- Demand Liabilities Portion of Savings Deposits with the Banking System
- ‘Other’ Deposits with RBI
- Currency with the Public
- Current Deposits with the Banking System
- Demand Liabilities of Savings Deposits with the Banking System
- ‘Other’ Deposits with RBI
- Term Deposits of residents with a contractual maturity up to and including one year with the Banking System
- Certificates of Deposits issued by Banks
- Currency with the Public
- Current Deposits with the Banking System
- Savings Deposits with the Banking System
- Certificates of Deposits issued by Banks
- Term Deposits of residents with a contractual maturity up to and including one year with the Banking System
- ‘Other’ Deposits with RBI
- Term Deposits of residents with a contractual maturity of over one year with the Banking System
- Call/Term borrowings from ‘Non-depository’ financial corporations by the Banking System.
- Central bank money (M0)- obligations of a central bank, including currency and central bank depository accounts.
- Commercial bank money (M1-M3)– obligations of commercial banks, including current accounts and savings accounts.
Note: Demand Deposits include deposits in the Current Account and Savings Account (CASA). Term Deposits (or time deposits) include Fixed Deposits (FD) and Recurring Deposits (RD)
M1 is the most liquid and easiest for transactions whereas M4 is the least liquid of all. M3 is the most commonly used measure of the money supply. It is also known as aggregate monetary resources.
4 – b
5 – c
The total number of bank notes and coins in a country's monetary base is known as the high powered money in accordance to the theories of economics.
High powered money has no inclusion of demand deposits.
High powered money is the total liability of the monetary authority of the country because of this it includes currency held by the public and cash reserves with the bank.
As money is made up of currency and demand deposits, whereas high-powered money is comprises of currency and bank cash reserves.
POSTED ON 02-02-2022 BY ADMIN
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