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Currency System
M1,M2,M3,M4
[Economy For Newbies by Mrunal Patel]
Contents
What is all this M1,M2,M3,M4 crap? ...........................................................................................................................1
Who calculates M1-M4? .............................................................................................................................................2
What are the other names of this? ..............................................................................................................................2
Was there any reform in it?.........................................................................................................................................2
What is all Hot money, soft money, hard currency etc?.................................................................................................2
What's Dear Money & Cheap money?..........................................................................................................................3
Where is all currency printed? (prelim / GS mains 2 markers)........................................................................................3

What is all this M1,M2,M3,M4 crap?

 It shows the money supply in the market.
 More money = more liquidity = easy to get loans = inflation
 Less money = less liquidity = hard to get loans = problem
 As we saw earlier, RBI controls the money supply by changing its CRR, Repo etc rates. (thus controls inflation)
that's called 'Monetary Policy'
 But for that, RBI needs to measure how much money is there in the market (=liquidity) ? they know it via these
M1-M4.
 Side note-- Govt. controls economy via changing Tax rates- that's called 'Fiscal Policy'
Now see this chart

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Who calculates M1-M4?

RBI since 1970-71
What are the other names of this?
1. Money Stock measure
2. Measures of monetary Aggregates
Was there any reform in it?
 Yes there was YB Reddy Group 1997-98 - and on their recommendations- following steps were taken.
 Financial Sector Survey every 3 Months
 4 New measures :M0-M3
 3 Types Liquidity
What is all Hot money, soft money, hard currency etc?
That's 'Types of Currencies' -See this chart

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What's Dear Money & Cheap money?

that's 'Types of Money Policy'

Dear money = hard to get loans ((high interest rate)

Cheap money = easy to get loans. (low interest rate)
Where is all currency printed? (prelim / GS mains 2 markers)

Nasik Security Press Coins are made in

stamps (Postal & Judicial) Mumbai
cheque Kolkata
bond Hyd
Kisan Vikas Patra Noida
Currency notes of 1,2,5,10,50
Dewas Hyderabad
Notes of 50,100,500 Excise Duty Stamps
Hoshangabad

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