Question

Supply of money refers to:

• A. Stock of money with the government.
• B. Stock of money with the banking system.
• C. Stock of money with the public at a point in time.
• D. Total gold reserves in the country.

Hint:

The most commonly used measure is $M_1$ (Narrow Money) = Currency with public + Demand Deposits. $M_3$ (Broad Money) additionally includes time deposits with banks.

Answer 1

The Correct Option is C

Step 1: Understanding the Concept:
Money supply is a stock concept representing the total volume of money held by the public in an economy at a particular point in time.
Step 2: Detailed Explanation:
The term "public" in the context of money supply includes households and business firms.
Money supply excludes:
1. Money held by the Government.
2. Money held by the Banking System (Central and Commercial banks).
This is because these institutions are the producers/suppliers of money, and their cash holdings are not in actual circulation for transactions.
Step 3: Final Answer:
Option (C) correctly captures that money supply is a stock held by the public at a specific point in time.