Broad Money (M4) comprises which?

Broad Money (M4) comprises which?

• A. Notes and Coins in circulation & all private bank accounts
• B. Central Bank reserves only
• C. Public sector deposits
• D. Currency in circulation only

Answer: (A)

Broad Money (M4) is the money that households and businesses can readily use for spending. It includes currency that people hold outside the banking system plus the deposits that the private sector keeps in banks. So it’s essentially notes and coins in circulation plus all private bank deposits. Why the other descriptions don’t fit: central bank reserves are funds the central bank holds and aren’t directly available to the public as spending money; public sector deposits aren’t part of the private money supply in circulation; and currency in circulation alone misses the large part of money tied up in bank deposits.

Broad Money (M4) is the money that households and businesses can readily use for spending. It includes currency that people hold outside the banking system plus the deposits that the private sector keeps in banks. So it’s essentially notes and coins in circulation plus all private bank deposits.

Why the other descriptions don’t fit: central bank reserves are funds the central bank holds and aren’t directly available to the public as spending money; public sector deposits aren’t part of the private money supply in circulation; and currency in circulation alone misses the large part of money tied up in bank deposits.