Money Supply and Inflation
Money Supply and Inflation What is Money? Money is anything that is widely accepted as a medium of exchange for goods and services. It also serves as a unit of account, a store of value, and a standard of deferred payment. Modern economies use currency notes and coins, along with digital money, as the most common forms of money. Money Supply Money supply refers to the total stock of money circulating in an economy at a particular point in time. It includes currency held by the public and demand deposits with banks. In India, the Reserve Bank of India (RBI) measures money supply in different categories: M1: Currency with public + demand deposits + other deposits with RBI M2: M1 + savings deposits with Post Office Savings Banks M3: M1 + time deposits with banks (widely used indicator) M4: M3 + total deposits with Post Office Savings Banks (excluding National Savings Certificates) Example: If currency with the public is ₹5,00,000 a...