MONEY SUPPLY AND INFLATION PART 2
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Indian Economy and Indian Financial System — JAIIB.
One-liners from this chapter
Free sample — 8 of 66 rapid-fire Q&A cards.
What is the Fisher's Quantity Theory of Money equation?
MV = PT, where M is money supply, V is velocity of circulation, P is price level, and T is volume of transactions.
What is the narrow money concept in India's monetary framework?
Narrow money includes currency with public and demand deposits.
What does the term 'velocity of money' mean in the context of monetary theory?
Velocity of money refers to the average number of times a unit of money changes hands during a given period, indicating how quickly money circulates in the economy.
What is broad money in India and which aggregate represents it?
Broad money is M3, including M1 plus time deposits with banks.
What is the Cambridge Cash Balance equation and how does it differ from Fisher's equation?
The Cambridge equation is M = kPT, where k is the fraction of income held as cash; it emphasizes the demand for money (holding motive) rather than the mechanical circulation view of Fisher.
What does 'liquidity trap' mean in monetary economics?
Liquidity trap is when monetary policy becomes ineffective near zero interest rates.
What is the meaning of M1 in India's money supply classification?
M1 (narrow money) comprises currency with the public, demand deposits with banks, and other deposits with the RBI; it is the most liquid measure of money supply.
What is 'seigniorage' in the context of money creation?
Seigniorage is profit earned by government from issuing currency.
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