[Economy for Newbies] Currency System M1,M2,M3,M4 -explained via

[Economy for Newbies] Currency System M1,M2,M3,M4 -explained via

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Currency System

M1,M2,M3,M4

[Economy For Newbies by VENKATESH]

What is all this M1,M2,M3,M4 crap?

·       It shows the money supply in the market.

·       More money = more liquidity = easy to get loans = inflation

·       Less money = less liquidity = hard to get loans = problem

·      As we saw earlier, RBI controls the money supply by changing its CRR, Repo etc rates. (thus controls inflation) that's called 'Monetary Policy'

·       But for that, RBI needs to measure how much money is there in the market (=liquidity) ? they know it via these M1-M4.

·       Side note-- Govt. controls economy via changing Tax rates- that's called 'Fiscal Policy'

Now see this chart (wait there is a little change in it-)

 Thank you
Satishtj for this

M1=
Currency with public + Current deposits with banking system + demand
liabilites portion of saving deposits with the banking system .
Governor
of RBI + ministers + MP can have account with RBI

Who calculates M1-M4?

RBI since 1970-71

What are the other names of this?

1.    Money Stock measure

2.    Measures of monetary Aggregates

Was there any reform in it?

·       Yes there was YB Reddy Group 1997-98 - and on their recommendations- following steps were taken.

·       Financial Sector Survey every 3 Months

·       4 New measures :M0-M3

·       3 Types Liquidity

What is all Hot money, soft money, hard currency etc?

That's 'Types of Currencies' -See this chart

What's Dear Money & Cheap money?

that's 'Types of Money Policy'

Dear money = hard to get loans ((high interest rate)

Cheap money = easy to get loans. (low interest rate)

Where is all currency printed? (prelim / GS mains 2 markers)

Nasik  Security Press stamps (Postal & Judicial) cheque bond Kisan Vikas Patra Currency notes of  1,2,5,10,50	Coins are made in Mumbai Kolkata Hyd Noida
Dewas     Notes of 50,100,500	Hyderabad     Excise Duty Stamps
Hoshangabad