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Question : Match the items in List I with those in List II.

Measure of Money Supply Formula
i. M1 a. M1 + Td
ii. M2 b. Cp + Dd + Od
iii. M3 c. M3 + TPOd
iv. M4 d. M1 + POSBd

Option 1: i-d, ii-a, iii-c, iv-b

Option 2: i-b, ii-d, iii-a, iv-c

Option 3: i-a, ii-d, iii-b, iv-c

Option 4: i-c, ii-b, iii-a, iv-d


Team Careers360 2nd Jan, 2024
Answer (1)
Team Careers360 7th Jan, 2024

Correct Answer: i-b, ii-d, iii-a, iv-c


Solution : The correct option is i-b, ii-d, iii-a, iv-c .

i-b: M1 is the currency in circulation and demand deposits. POSBd is a point-of-sale debit card transaction. Thus, M1 + POSBd gives a broader measure of M1.

ii-d: M2 is M1 plus savings deposits, small-time deposits, and retail money market deposits. These deposits are less liquid than currency and demand deposits, but they can still be easily converted into cash.

iii-a: M3 is M2 plus large-time deposits, institutional deposits, and overnight repurchase agreements. These deposits are even less liquid than those included in M2, but they still represent potential sources of funds for the economy.

iv-c: M4 is M3 plus non-deposit money market mutual fund shares. These shares are a type of financial instrument that allows investors to pool their money together to invest in short-term securities.

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