• NAME: Himanshu Malandkar

• ROLL NO: 243

• DIV: B
• CLASS: SYBCOM
• SUBJECT: Business Economics.
Topic:
The Constituent Of Money Supply
What is Constituent of Money Supply?
■ The money supply is the sum total of all of the currency and other liquid assets in a
country’s economy on the date measured. The money supply includes all cash in
circulation and all bank deposits that the account holder can easily convert to cash
■ Governments issue paper currency and coins through their central banks or
treasuries, or a combination of both. In order to keep the economy stable, banking
regulators increase or reduce the available money supply through policy changes and
regulatory decisions.
Features of Money Supply

■ Money supply includes the money held by the public in an economy only. Here, ‘public’
means that sector of the country, which is money-using, i.e., firms and individuals.
■ However, it does not include the money-creating sector of a country, as the amount of
money or cash held by them does not mean the actual circulation of money in the
country, The money-creating sector of a country includes the Banking system and
Government.
■ Money Supply is a Stock Concept. It means that the money supply is concerned with a
particular point of time.
Measures of Money Supply

■ Till 1967-68, only the narrow measure of the money supply was used by the Reserve
Bank of India (RBI). However, since 1977, four measures of money supply have evolved
in the economy, i.e., M1, M2, M3, and M4.
■ M1: The first and basic measure of the money supply is M1, which is also known as
Transaction Money
■ M2: The second measure of the money supply is M2, and is a broader concept as
compared to M1
■ M3: The third measure of the money supply is M3 and is a broader concept as compared
to M1. It includes M1 and Net Time Deposits with Bank.
■ M4: The last measure of the money supply is M4, and is a broader concept as compared
to M1 and M3
THANK YOU