• The money supply in a country is measured by monetary aggregates. The money supply is the total amount of money in circulation in a given economy at any given time.
• The Reserve Bank of India (RBI) measures and publishes the money supply on a weekly or fortnightly basis in India.
• The money supply in the economy is sometimes represented by a monetary aggregate known as 'wide money,' also known as M3.
• RBI sometimes refers to new aggregates as NM0, NM1, NM2, and NM3 to distinguish them from previous aggregates.
• M0 is the term given to reserve money under the new system. Post office savings bank deposits were included in M2 and M4.
• (Working Group on Money Supply: Analytics and Methodology of Compilation (Chairman: Dr Y.V. Reddy) advised compiling four monetary aggregates M0 (monetary base), M1 (narrow money), M2, M3 (broad money)
• Money multiplier: M3:M0 or 1/r (reserve ratio)
• Monetization of Economy: M1:GDP
• Monetary Deepning: M3/GDP

M0 (Monetary Base or Reserve Money)

M1 (Narrow Money)

M2

M3 (Broad Money)

M4

HIGHEST LIQUIDITY TO LOWEST LIQUIDITY

• M1 ⇒ CURRENCY + DEMAND DEPOSITS + OTHER DEPOSITS
• M2 ⇒ M1 + POST OFFICE (ONLY SAVINGS)