CA Foundation · Business Economics · Money Market
Using the conventional classification, an economy has currency with the public ₹2,000 crore, demand deposits with banks ₹3,500 crore, other deposits with RBI ₹100 crore, post office savings bank deposits ₹400 crore and time deposits with banks ₹6,000 crore. What is M2?
M2 is ₹6,000 crore. First compute M1 as 2,000 + 3,500 + 100 = ₹5,600 crore, then add post office savings bank deposits of ₹400 crore. Bank time deposits are excluded because they enter only at M3.
- A₹5,600 crore
- B₹6,000 croreCorrect
- C₹12,000 crore
- D₹12,500 crore
Explanation
M1 = 2,000 + 3,500 + 100 = ₹5,600 crore. M2 = M1 + post office savings bank deposits = 5,600 + 400 = ₹6,000 crore. Option C or D includes time deposits of banks (₹6,000 crore), which belong to M3, not M2.
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