alleryIn the chapter's M₁ definition, M₁ equals
ACurrency with the public + demand deposits with banks
BTotal assets of the central bank
CCurrency only
DDeposits only
Answer & Solution
Correct answer: A. Currency with the public + demand deposits with banks
M₁ (narrow money) = currency held by the public + demand deposits.
Broader measures (M₂, M₃, M₄) add time deposits and other liabilities.
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