MONEY SUPPLY AND INFLATION PART 1
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Free sample — 8 of 67 rapid-fire Q&A cards.
What is money supply in an economy?
Money supply refers to the total stock of money available in an economy at a specific point in time, including currency in circulation and deposits held by the public with banks.
What is the primary source of money creation in a modern economy?
Commercial banks create money through credit expansion process.
What does M0 (Reserve Money) represent in India?
M0, also called Reserve Money or High-Powered Money, consists of currency in circulation plus bankers' deposits with RBI plus other deposits with RBI.
What is the formula for calculating the money multiplier?
Money multiplier equals 1 divided by Cash Reserve Ratio.
Which monetary aggregate is known as 'Narrow Money' in India?
M1 is known as Narrow Money and comprises currency with the public, demand deposits with banks, and other deposits with RBI.
What does the term 'legal tender' mean in the context of money supply?
Currency that must be legally accepted for payment of debts.
What is the composition of M2 in India's monetary aggregates?
M2 equals M1 plus savings deposits with post office savings banks, representing a broader measure of money supply than Narrow Money.
What is 'high-powered money' in monetary economics?
Currency in circulation plus bank reserves held with RBI.
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