Q. Consider the following statements with reference to banking terminology:
1.Narrow Money refers to highly liquid forms of money which banks can freely use for long-term lending.
2.Broad Money includes components which banks can use for their lending programmes as it stays with them for a known period.
Which of the above statements is/are correct?
Answer: B
Notes:
Explanation:
- Narrow Money (e.g., M1 and M2) refers to highly liquid money, such as currency with the public and demand deposits, but it is not suitable for lending because it can be withdrawn at any time.
- Broad Money (M3) includes time deposits which stay with banks for a predictable period, allowing banks to use it for their lending operations.
Source: Indian Economy (Ramesh singh)
