Question
Download Solution PDFRBI defined M1 as CU + DD. What is DD?
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFThe correct answer is Option 4.
Key Points
- In the context of the Reserve Bank of India (RBI) defining M1, "DD" stands for Demand Deposits.
- Demand Deposits represent the net demand deposits held by commercial banks.
- Demand Deposits are a type of bank account from which deposited funds can be withdrawn at any time without any notice to the bank.
- These types of accounts include checking accounts, savings accounts, or any other type of bank account that allows for the immediate withdrawal of funds.
- They are considered to be highly liquid assets and are included in the calculation of the M1 money supply.
- Net Demand Deposits would account for the total of these deposits held by a bank, minus any amounts that the bank has itself deposited with other banks.
- This gives a more accurate view of a bank's liquidity and the amount of money readily available in the economy.
Additional Information
- The Reserve Bank of India (RBI) defines various monetary aggregates to measure the amount of money in circulation in the Indian economy.
- M1 money supply includes components such as:
- Currency (notes and coins in circulation with the public and vault cash of banks) - denoted as CU.
- Demand Deposits of the public (DD) with commercial banks.
Last updated on May 28, 2025
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