According to the Working Group on Money Supply: Analytics and Methodology of Compilation (1998) constituted by the Reserve Bank of India (RBI), which of the following is NOT a component of the new monetary aggregate ?
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Answer: (C)
Following the RBI's 1998 Working Group revision, (the narrowest new monetary aggregate, analogous to the old ) is composed of: currency with the public, demand deposits with the banking system, and 'Other' deposits with the RBI.
Short-term time deposits of residents are NOT part of — they enter the broader aggregates (which adds short-term time deposits) and (the broadest, adding long-term time deposits and other items). Time deposits by their nature are less liquid than demand deposits and currency, which is why the narrowest aggregate excludes them.
(A), (B), and (D) are all genuine components of ; only (C) is excluded.
Therefore the answer is (C).
'Other deposits with the RBI' sounds like an unusual, easily-overlooked category that students might assume is the 'odd one out' and therefore the excluded item, when in fact it IS a genuine (if small) component of — the real exclusion (time deposits) is a more substantial, commonly known monetary category that's easy to assume must be included given how central it is to overall money supply.
According to the Working Group on Money Supply: Analytics and Methodology of Compilation (1998) constituted by the Reserve Bank of India (RBI), which of the following is NOT a component of the new monetary aggregate NM₁? (A) Currency with the public (B) Demand deposits with the banking system (C) Short-term time deposits of residents (D) 'Other' deposits with the RBI
Also written as: According to the Working Group on Money Supply: Analytics and Methodology of Compilation (1998) constituted by the Reserve Bank of India (RBI), which of the following is NOT a component of the new monetary aggregate NM_1?
Money supply and the banking multiplier has come up 74 times in 7 exams since 2005.
This question is on Monetary aggregates and the transmission mechanism, part of Money supply and the banking multiplier in Macroeconomics.
How money is measured and how policy changes reach the real economy.
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