ESSENTIALS OF A SOUND CURRENCY SYSTEM

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ESSENTIALS OF A SOUND CURRENCY SYSTEM

Money supply does not mean only the supply of money in the form of coins and currency. In modern economic activities any financial paper which represents money or near money also a part of moodily supply. Thus in modern day business sense money supply includes coins, currency, demand deposits and time deposits with bank and other financial assets such as deposits with non-bank financial intermediaries, post office savings deposits, money mar ket instruments like, treasury and cxr+rnngc bills as well as bonds and equities etc. The money supply concept in India is divided into four components such as. , (i) Narrow Money Concept t can he considered as reserved money 01′ high powered money, which includes. C = Currency and coins.  DD = Demand deposits with banbonD = It is the deposits with RIJI with ref rence to employees pension, provident and guarantee  funds + deposits of some non-bank financial institutions and + other compulsory depo its. Mr =: C+OD+DD (ii) “l\loncy Stock” Com’ pi 1:\’1/, It is nothing but an extension of MJ along with the addition of Post office Savings Bank Deposits (POSIJD). As people love money and material wealth. They keep their  money in the . afest institutions. Post offices arc government organisation where common people feci safe to keep their money, Hence POSEIDis added to Broad Money Concept  Milton Friedman included time deposits also as part of money supply. Even chakravarty committee.

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ESSENTIALS OF A SOUND CURRENCY SYSTEM