(a) Define Money Supply. (b) Explain any one component of money supply.

Question

Accepted Answer

(a) **Money Supply** refers to the total amount of money held by the public in an economy at a particular point of time. It is a stock variable that includes currency with public and demand deposits with banks.

(b) **Currency with Public** is one component of money supply. It consists of paper notes and coins held by individuals and firms. This is the most liquid form of money and is also called Fiat Money because it is declared legal tender by government order.