Skip to content
GK24
Prime
Indian EconomyMediumAsked in: UPSC CAPF · CAPF 2018, Paper I

The Reserve Bank of India defines narrow money as

  1. A.CU (currency notes + coins) + DD (net demand deposits held by commercial banks)
  2. B.CU + DD + saving deposits with post office savings banks
  3. C.CU + DD + net time deposits of commercial banks
  4. D.CU + DD + net time deposits of commercial banks + total deposits of post offices

Correct answer

A. CU (currency notes + coins) + DD (net demand deposits held by commercial banks)

Explanation

The correct answer is A. Narrow money, M1, is currency held by the public plus net demand deposits with commercial banks, the most liquid forms of money.

The RBI publishes four measures of money supply. M1 = CU + DD (strictly, it also counts the small "other deposits" with the RBI). M2 = M1 + savings deposits with post office savings banks. M3 = M1 + net time deposits of commercial banks. M4 = M3 + total deposits with post offices, excluding National Savings Certificates. M1 and M2 are called narrow money because they can be spent at once, while M3 and M4 are broad money. M3, also called aggregate monetary resources, is the measure most used in policy.

B is wrong because adding post office savings deposits to M1 gives M2. C is wrong because adding net time deposits of banks gives M3, which is broad money. D is wrong because that is M4, the broadest and least liquid measure.

Exam tip: M1 = CU + DD; M2 = M1 + post office savings; M3 = M1 + bank time deposits; M4 = M3 + post office deposits; liquidity falls from M1 to M4.

Practice Questions

View all
Q1.Indian EconomyAsked in: UPSC CAPF · CAPF 2018, Paper IHard

In National Income (NI) accounts, Personal Income (PI) is defined as

  1. A.NI - undistributed profits - net interest payments made by households - corporate tax + transfer payments to the households from the government and firms
  2. B.NI - undistributed profits - corporate tax + transfer payments to the households from the government and firms
  3. C.undistributed profits - net interest payments made by households + transfer payments to the households from the government and firms
  4. D.undistributed profits - net interest payments made by households - corporate tax
Show answer
Correct answer: A. NI - undistributed profits - net interest payments made by households - corporate tax + transfer payments to the households from the government and firms

Personal Income is the part of National Income that actually reaches households, plus the transfers they receive. National Income counts all factor incomes earned in the economy, but not all of it is paid out to people.

Q2.Indian EconomyMedium

The Khushkhera-Bhiwadi-Neemrana Investment Region is a node of the Delhi Mumbai Industrial Corridor in which state?

  1. A.Haryana
  2. B.Rajasthan
  3. C.Uttar Pradesh
  4. D.Gujarat
Show answer
Correct answer: B. Rajasthan

Khushkhera, Bhiwadi and Neemrana lie in the Alwar and Khairthal-Tijara belt of north-eastern Rajasthan, close to the Delhi border and on the Delhi-Jaipur highway, and the region is already a cluster of automobile ancillary, electronics and Japanese-owned units.

Q4.Indian EconomyMedium

The National Industrial Corridor Development Corporation works under which ministry?

  1. A.The Ministry of Road Transport and Highways
  2. B.The Ministry of Commerce and Industry
  3. C.The Ministry of Heavy Industries
  4. D.The Ministry of Railways
Show answer
Correct answer: B. The Ministry of Commerce and Industry

The National Industrial Corridor Development Corporation, which was earlier the Delhi Mumbai Industrial Corridor Development Corporation, is the implementing agency of the National Industrial Corridor Development Programme and functions under the Department for Promotion of Industry and Internal Trade in that ministry.

Q5.Indian EconomyHard

Ponneri, Tumakuru and Krishnapatnam are the nodes of which industrial corridor?

  1. A.The Bengaluru Mumbai Economic Corridor
  2. B.The Chennai Bengaluru Industrial Corridor
  3. C.The Hyderabad Nagpur Industrial Corridor
  4. D.The East Coast Economic Corridor
Show answer
Correct answer: B. The Chennai Bengaluru Industrial Corridor

Its three nodes are Ponneri in Tamil Nadu, Tumakuru in Karnataka and Krishnapatnam in Andhra Pradesh, and the corridor is developed with Japanese cooperation to link the engineering and automobile cluster of Chennai with the electronics and machine tool cluster of Bengaluru.