Q. Consider the following statements regarding money supply:- Money supply is a flow variable.
- While M1 and M2 are known as narrow money, M3 and M4 are broad money.
- M3 is also known as aggregate monetary resource and is the most commonly used measure of money supply.
Which of the above statements is/are correct?
Answer:
Only 2 and 3
Notes: The money supply is not a flow variable, but rather a stock variable, meaning it is measured at a specific point in time. M1 and M2 are narrow money, while M3 and M4 are broad money, with M3 being the most widely used indicator. M3 includes time deposits, making it broader than M1 and M2.