Chicago Approach Definition of Money Supply
The definition of the money supply varies across different economic approaches. Understanding these differences is crucial for economic analysis.
Key Concept: Time Deposits Inclusion
- The question asks which approach includes Time Deposits with commercial banks in its definition of money supply.
- The Chicago Approach is known for its broader definition of money.
- This approach, associated with economists like Milton Friedman, considers time deposits (like savings and fixed deposits) as part of the money supply because they are readily convertible into demand deposits or currency and serve as a store of value.
- Other approaches, like the conventional or narrower definitions, often exclude time deposits as they are not typically used directly for transactions.
Correct Answer Identification
Based on the definition, the Chicago Approach is the one that includes time deposits with commercial banks in the definition of money supply.
Therefore, the correct option is The Chicago Approach.
Important Questions from Money and Banking
Which one of the following is likely to be the most inflationary in its effects?
Which one of the following effects of creation of black money in India has been the main cause of worry to the Government of India?
Consider the following statements :
The effect of devaluation of a currency is that it necessarily
1. improves the competitiveness of the domestic exports in the foreign markets
2. increase the foreign value of domestic currency
3. improves the trade balance
Which of the above statements is/are correct?
Indian Government Bond Yields are influenced by which of the following?
1. Actions of the United States Federal Reserve
2. Actions of the Reserve Bank of India
3. Inflation and short-term interest rates
Select the correct answer using the code given below.
With reference to “Urban Cooperative Banks" in India, consider the following statements :
1. They are supervised and regulated by local boards set up by the State Governments.
2. They can issue equity shares and preference shares.
3. They were brought under the purview of the Banking Regulation Act, 1949 through an Amendment in 1966
Which of the statements given above is/are correct?
