Question

Arrange the following conditions from most to least liquid form: (A) Currency + Demand Deposit + Savings deposits with Post Office savings banks.
(B) Currency + Demand Deposit + Net time deposits of commercial banks + Total deposits with Post Office savings organizations.
(C) Currency + Demand Deposit.
(D) Currency + Demand Deposit + Net time deposits of commercial banks.

• A. (A), (B), (C), (D)
• B. (C), (A), (D), (B)
• C. (B), (A), (D), (C)
• D. (C), (B), (D), (A)

Hint:

Monetary aggregates: M1 = most liquid (Currency + Demand deposits), while broader measures (M2, M3, M4) are less liquid.

Answer 1

The Correct Option is B

Step 1: Understand Liquidity.
Liquidity is defined as the speed at which an asset can be exchanged for cash without any reduction in its value.
- Highest liquidity is associated with Currency and demand deposits.
- Savings deposits rank next.
- Time deposits follow.
- Post office deposits represent the least liquid assets.
Step 2: Rank the given options.
- (C) Currency + Demand Deposit: This is the most liquid option (M1).
- (A) Currency + Demand + Savings deposits (including Post Office): This is the next most liquid.
- (D) Currency + Demand + Net time deposits (M2/M3): This is less liquid than (A).
- (B) Currency + Demand + Net time + Post Office deposits: This is the broadest and least liquid option.
Step 3: Determine the correct sequence.
The ordered sequence from most to least liquid is: (C), (A), (D), (B).
Final Answer: \[\boxed{(C), (A), (D), (B)}\]