Question

M3 is the sum of all money in the economy.

Which of the following correctly shows how to
calculate for the entire money supply?
A. M1+ M2 + M3
B. M1+ M2-M3
C. M1x M2 x M3

Answer 1

A. M1+ M2 + M3

M3 consists of all currency notes held by the public, all demand deposits with the bank, deposits of all the banks with the RBI and the net Time Deposits of all the banks in the country. So M3 = M1 + time deposits of banks.

Explanation:

Answer 2

A. M1+ M2 + M3

Explanation:

M1 is the money supply that makes it easy to convert assets/items into currency.

M2 is the deposits and money market funds.

Add M1, M2, and M3 to calculate the entire money supply of all the money in the economy.