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Currency System
M1,M2,M3,M4
[Economy For Newbies by Mrunal Patel]

Contents
What is all this M1,M2,M3,M4 crap? ...........................................................................................................................1
Who calculates M1-M4? .............................................................................................................................................2
What are the other names of this? ..............................................................................................................................2
Was there any reform in it?.........................................................................................................................................2
What is all Hot money, soft money, hard currency etc?.................................................................................................2
What's Dear Money & Cheap money?..........................................................................................................................3
Where is all currency printed? (prelim / GS mains 2 markers)........................................................................................3

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

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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

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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
Dewas
Notes of 50,100,500
Hoshangabad

Coins are made in


Mumbai
Kolkata
Hyd
Noida
Hyderabad
Excise Duty Stamps

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