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State the meaning and components of M1 measure of money supply.
State the meaning and components of M1 measure of money supply.
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M1 is the measure of money supply that includes currency with the public, demand deposits, and other deposits that can be used immediately for transactions.
Updated On: Jan 14, 2026
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Solution and Explanation
M1, representing the narrow money supply, encompasses the most liquid monetary components utilized for transactions. It comprises:
1. Currency in Public Hands: Coins and paper currency in circulation, excluding that held by financial institutions.
2. Bank Demand Deposits: Funds withdrawable on demand by account holders without delay, such as checking accounts.
3. Other Deposits at the Reserve Bank of India (RBI): Funds held by the RBI that are immediately accessible.
M1 is the most liquid money supply measure, reflecting only assets readily usable for immediate spending.
1. Currency in Public Hands: Coins and paper currency in circulation, excluding that held by financial institutions.
2. Bank Demand Deposits: Funds withdrawable on demand by account holders without delay, such as checking accounts.
3. Other Deposits at the Reserve Bank of India (RBI): Funds held by the RBI that are immediately accessible.
M1 is the most liquid money supply measure, reflecting only assets readily usable for immediate spending.
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