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CMA Foundation · Fundamentals of Business Economics and Management · Money and Banking

In an economy, currency with the public is ₹8,000 crore, demand deposits with banks are ₹12,000 crore, other deposits with RBI are ₹500 crore, and time deposits with banks are ₹30,000 crore. Using the traditional aggregates, what is M3?

M3 is ₹50,500 crore. First compute M1 as 8,000 plus 12,000 plus 500, which is 20,500 crore. Then add time deposits of 30,000 crore. Omitting the other deposits with the RBI would give 50,000, which is incorrect.

  1. A₹20,500 crore
  2. B₹50,000 crore
  3. C₹50,500 croreCorrect
  4. D₹42,000 crore

Explanation

M1 = 8,000 + 12,000 + 500 = 20,500. M3 = M1 + time deposits = 20,500 + 30,000 = 50,500. Option ₹50,000 crore wrongly omits the other deposits with RBI, while ₹20,500 crore is only M1.

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