18 Questions
What is the primary difference between the definitions of M2 and M3?
M3 includes savings deposits of post office savings banks, while M2 does not
What is excluded from the definition of 'public' in the context of money supply?
The government and the banking system
What type of deposits are included in the definition of M1?
Demand deposits with the banking system
Which of the following is NOT included in the definition of broad money (M3)?
Deposits with an agreed maturity of up to five years
Which institution is included in the definition of 'banking system'?
All banks that accept demand deposits
What is the primary difference between demand deposits and time deposits?
Time deposits have a longer maturity period
What happens to excess reserves when banks expect an increase in deposit outflows?
They increase to provide more assurance against the possibility
What is the primary reason for the decline in excess reserves when expected deposit outflows decrease?
Banks no longer need to hold excess reserves as a precaution
What is the effect of banks converting deposits into currency on the creation of credit money?
It decreases the creation of credit money
What is the primary reason for the sharp deceleration in monetary growth during times of financial crises?
Banks become unwilling to lend to small and medium scale industries
What is the effect of a decline in expected deposit outflows on the monetary base?
It increases the monetary base
What is the primary reason for the variation in money supply over time?
The behaviour of commercial banks
What is the primary reason why the money multiplier and the deposit multiplier are not identical?
Banks maintain reserves at a level above the minimum required reserve.
What happens to excess reserves when banks are risk averse to lending?
They are parked under reverse repo.
What is the outcome when banks create money through credit?
An expansion of money not backed by money proper.
What is the relationship between the type of money created by commercial banks and that issued by the central bank?
They are identical.
What happened to the average deposit of funds in the overnight reverse repo window in India during the COVID pandemic?
It increased more than three times.
What is the primary reason why banks maintain reserves above the minimum required reserve?
To reduce their risk exposure.
This quiz covers the definitions and components of M1, M2, and M3 in the money supply system. Learn about the different types of deposits and securities that make up the money supply.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
