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In the RBI's measures of money supply, M1 is defined as
Acurrency plus time deposits
Bdemand deposits alone
Ccurrency plus post office savings
Dcurrency plus demand deposits
Answer & Solution
Correct answer: D. currency plus demand deposits
1. CU stands for currency held by the public and DD for demand deposits with banks.
2. M1 = **CU + DD**.
3. Adding post office savings deposits gives M2, and adding net time deposits of commercial banks gives M3.
4. Time deposits are therefore excluded from M1, which is what makes the second option wrong.
_Source: NCERT Class 12 Introductory Macroeconomics, Ch 3 "Money and Banking", section 3.2 DEMAND FOR MONEY AND SUPPLY OF MONEY_
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