Which of the following measures of money supply is popularly known as 'Broad Money'?
Correct Answer: M3
Subject: economics
Explanation: • <b>Key Fact</b>
M3 is known as broad money in the monetary system.
• <b>Supporting Detail</b>
It is calculated as M1 plus net time deposits of the public with commercial banks.
• <b>Related Concept</b>
M1 and M2 are considered 'Narrow Money', with M1 being the most liquid.
• <b>Why wrong options are wrong</b>
M1 and M2 are narrow money, and M0 is the monetary base or high-powered money, not broad money.
• <b>Exam Trick</b>
M3 is "Broad" because it includes long-term Time Deposits (Fixed Deposits), which significantly expand the money pool.
• <b>Additional Info</b>
M4 is the least liquid measure and is calculated as M3 plus total post office deposits.