economics medium MCQ

Which component is added to M1 to derive the broad money measure, M3?

  1. Savings deposits with post offices
  2. Time deposits (fixed deposits) with banks
  3. Currency held in bank vaults
  4. Inter-bank call money

Answer: Time deposits (fixed deposits) with banks

M3, widely used for monetary policy analysis, is calculated as M1 plus time deposits held by the public with banks. While time deposits are less liquid than demand deposits because they have a fixed maturity period, they still represent a significant store of purchasing power in the economy.

Topic Macroeconomics - Money
Exam Relevance Banking, UPSC Prelims, SSC
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