Analyze the structure of money supply aggregates in India. Which aggregate represents the broadest measure of money supply, incorporating all postal savings deposits?

💡 Solution & Explanation

M4 is the broadest measure of money supply defined by the Reserve Bank of India, encompassing total currency in circulation, demand deposits with banks, time deposits with banks, and total deposits with the post office savings organization excluding national savings certificates. M1 represents narrow money consisting of currency with the public, demand deposits, and other deposits with the central bank. M2 includes M1 plus savings deposits with post office savings banks. M3 is widely termed broad money and includes currency with the public, demand deposits, and time deposits of commercial banks.