With reference to the classification of money in the Indian banking system, consider the following statements: 1. Narrow money is highly liquid and includes components like currency and demand deposits. 2. Broad money includes more stable deposits, enabling banks to use it for lending activities. Which of the statements given above is/are correct? |ForumIAS

[A] 1 only

[B] 2 only

[C] Both 1 and 2

[D] Neither 1 nor 2

Answer: C

Notes:

Explanation:

Narrow money (M1) comprises currency with the public + demand deposits with the banking system. It is highly liquid.
Broad money (M3) includes time deposits that are more stable, allowing banks to use them for lending purposes.

Source- 11th NCERT: Economics: Indian Economic Development and TMH Indian Economy by Ramesh Singh

Subscribe to get the latest posts sent to your email.