Measures of Money Supply Quiz for RBI Grade B

Dear aspirants,
We are presenting you the measures of money supply quiz for RBI Grade B Finance Section of the exam. Before you go through the quiz we recommend you to read the article on Measures of Money Supply : M0, M1, M2, M3 and M4

Let’s get started and do check answers which are given at the end of the quiz.

1. In which year does Reserve Bank of India introduced the concept of classification of money into M1, M2, M3 and so on?
   1. 1956
   2. 1961
   3. 1977
   4. 1998
2. Which one out of the following is also known as Reserve Money or High-Powered money or base money?
   1. M0
   2. M1
   3. M2
   4. M3
3. Which out of the following is the correct formula for calculating the Reserve money M0?
   1. Currency with public + Demand deposits with the Banking system (current account, saving account) + Other deposits with RBI
   2. Currency in Circulation + Bankers’ Deposits with RBI + Other deposits with RBI
   3. M1 + Time deposits with the banking system
   4. M1 + Savings deposits of post office savings banks
4. Which out of the following is the correct formula for calculating the Narrow money M1?
   1. Currency with public + Demand deposits with the Banking system (current account, saving account) + Other deposits with RBI
   2. Currency in Circulation + Bankers’ Deposits with RBI + Other deposits with RBI
   3. M1 + Time deposits with the banking system
   4. M1 + Savings deposits of post office savings banks
5. Which out of the following is the correct formula for calculating the Narrow money M2?
   1. Currency with public + Demand deposits with the Banking system (current account, saving account) + Other deposits with RBI
   2. M3 + All deposits with post office savings banks
   3. M1 + Time deposits with the banking system
   4. M1 + Savings deposits of post office savings banks
6. Which out of the following is the correct formula for calculating the Broad money M3?
   1. Currency with public + Demand deposits with the Banking system (current account, saving account) + Other deposits with RBI
   2. M3 + All deposits with post office savings banks
   3. M1 + Time deposits with the banking system
   4. M1 + Savings deposits of post office savings banks
7. Which among the following is/are known as Narrow Money?
   a) M1
   b) M2
   c) M3
   d) M4
   Select the correct answer from following options:
   1. Only a and b
   2. Only b and c
   3. Only c and d
   4. All are correct
8. Which among the following is/are known as Broad Money?
   a) M1
   b) M2
   c) M3
   d) M4
   Select the correct answer from following options:
   1. Only a and b
   2. Only b and c
   3. Only c and d
   4. All are correct
9. Which one out of the following is most liquid among the measures of money supply?
   1. M1
   2. M2
   3. M3
   4. M4
10. Which one out of the following is least liquid among the measures of money supply?
    1. M1
    2. M2
    3. M3
    4. M4

Answers

1. 3
   The measures of money supply in India are classified into four categories M1, M2, M3 and M4 along with M0. This classification was introduced in April 1977
2. 1
   M0 is also known as High-Powered Money, monetary base, base money etc.
3. 2
   M0 = Currency in Circulation + Bankers’ Deposits with RBI + Other deposits with RBI
4. 1
   M1 = Currency with public + Demand deposits with the Banking system (current account, saving account) + Other deposits with RBI
5. 4
   M1 + Savings deposits of post office savings banks
6. 3
   M1 + Time deposits with the banking system
7. 1
   M1 and M2 are collectively known as Narrow Money
8. 3
   M3 and M4 are collectively known as Broad Money
9. 1
10. 4
    Liquidity order is M1>M2>M3>M4 i.e. M1 is most liquid and M4 is least liquid.

You may also like to read following MCQs for RBI Grade B exam: 

• Monetary Policy Committee questions
• Questions on RBI
• Monetary Policy Instruments MCQ
• Financial Instruments Questions

Click to go to RBI Grade B Preparation Page  | Click to read more such quizzes

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