Q1. Which of the following components are included in Reserve Money (M0) in India?
- Currency with the public
- Demand deposits with commercial banks
- Bankers’ deposits with the RBI
- Other deposits with the RBI
Select the correct answer using the code below:
A. 1, 2 and 4 only
B. 1, 3 and 4 only
C. 2 and 3 only
D. 1, 2, 3 and 4
Correct Answer: B
Explanation: M0 includes currency with the public, bankers’ deposits with RBI, and other deposits with RBI; demand deposits are part of M1.
Q2. Which of the following monetary aggregates is referred to as Broad Money in India?
A. M4
B. M2
C. M3
D. M1
Correct Answer: C
Explanation: M3 is called Broad Money and includes time deposits with banks.
Q3. Consider the following statements regarding M1:
- It includes demand deposits with banks.
- It includes time deposits with banks.
- It includes currency with the public.
Which of the statements given above are correct?
A. 2 and 3 only
B. 1 and 3 only
C. 1 only
D. 1, 2 and 3
Correct Answer: B
Explanation: Time deposits are excluded from M1 and included in M3.
Q4. Savings deposits with post offices are included in which of the following monetary aggregates?
A. M3
B. M0
C. M2
D. M1
Correct Answer: C
Explanation: M2 = M1 + savings deposits with post offices.
Q5. Arrange the following monetary aggregates in decreasing order of liquidity:
A. M1 > M2 > M3 > M4 > M0
B. M0 > M1 > M2 > M3 > M4
C. M3 > M2 > M1 > M0
D. M4 > M3 > M2 > M1
Correct Answer: B
Explanation: Liquidity is highest in reserve money and declines as deposits increase.
