The narrow measure of money supply is known as:

Question

Read the following text carefully:
“The Reserve Bank of India (RBI) announced a 50 basis point Repo Rate cut to 5.50% from 6%.”
In the light of the given text and common understanding, answer the following questions:

[(i)] Identify the economic issue indicated in the above text.
[(ii)] Explain the likely causes and consequences of this step of RBI on the economy.

Answer 1

M1, the narrowest measure of money supply, categorizes different types of money available in an economy. M1 encompasses:

Currency in circulation (coins and banknotes)
Demand deposits (checking accounts)
Other highly liquid deposits

M1's defining feature is its extreme liquidity, allowing its components to be rapidly and readily used for transactions without value depreciation. M1 is vital for daily financial activities and acts as a principal money supply indicator for policymakers.

The narrow measure of money supply is known as:

The Correct Option is A

Solution and Explanation

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