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Doubt: Money Supply Question

Money with which of the following sector(s) is not considered to be part of Money Supply ?
1. Households
2. Firms
3. Banks
4. Government

A. 2 only
B . 2&3
C. 4 only
D. 3 & 4

While i thought the answer should be C but it was D ( Test Series ) . Can someone explain ?

Comments

  • Banks by decreasing loan rates can increase the money available in the market.
  • US can also affect Money Supply in the economy that does not mean money with US Fed Bank is part of indian money supply.
  • US can also affect Money Supply in the economy that does not mean money with US Fed Bank is part of indian money supply.
    Explain How can US affect money supply?
    When we say US policies are affecting us it is our Govt or RBI which does something in response to US policy which changes money supply in our country.
  • I meant indirectly US Fed bank can. Leave it . The question is not about influencing , it's if the "bank's money" is included in Money Supply .
  • @Naren D is correct. This is very basic economics question.

    Govt. and banks are suppliers of money and money held by suppliers of money is not included in money suppply. It only includes that stock of money which is held by people.
  • hmm i thought the same that its between the people who are transacting , but in the formula we use "other deposits" held by RBI in calculation of M1 , thats not money in transaction ! so how come we include that ?
  • edited August 2015
    The question is incomplete...it would be D only when a circular flow of money in a simplified economy (i.e. absence of govt.) takes place and this should have been mentioned...
    but in a domestic economy with a govt setup , sectors would be : households, firms, govt and financial markets (but not banks)...
  • @Naren D is correct. This is very basic economics question.

    Govt. and banks are suppliers of money and money held by suppliers of money is not included in money suppply. It only includes that stock of money which is held by people.
    But dude wait, what about demand deposits ? People can withdraw or deposit anytime.bank by itself doesnt supply money. I would go for 4 only. What say?
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