Assertion (A): Net Demand Deposits (and not Gross Demand Deposits) of commercial Banks are included in the money supply.
Assertion (A): Net Demand Deposits (and not Gross Demand Deposits) of commercial Banks are included in the money supply.
Reason (R): Inter-bank deposits are the deposits held by banks on behalf of other banks and do not belong to the public.
Alternatives:
(a) Both Assertion (A) and Reason (R) are True and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are True and Reason (R) is not the correct explanation of Assertion (A)
(c) Assertion (A) is True but Reason (R) is False.
(d) Assertion (A) is False but Reason (R) is True.
Anurag Pathak Changed status to publish December 14, 2023
Ans – (a)
Explanation:-
Money supply refers to the total volume of money held by the public at a particular point of time in an economy.
There are two components of the money supply.
Money Supply = Current with Public + Net Demand Deposits with Banks
Money supply includes only the net demand deposits with the banks
It must be noted that demand deposits are taken on a net basis, i.e., inter-bank deposits are excluded.
Inter-bank deposits are the deposits held by banks on behalf of other banks. Such deposits do not form a part of the money supply, as they do not belong to the public.
Thus Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of the Assertion (A).
Anurag Pathak Changed status to publish December 14, 2023
