Question

Define Money Supply.

Hint:

Money supply is a stock. It is the total money held by the public at a particular point of time.

Answer 1

Step 1: Understand what is being asked:
The question asks for the meaning of money supply. This is a one-mark definition, so one clear sentence is enough.
Money supply is a stock concept. It is measured at a point of time, like 31 March, and not over a period.

Step 2: Recall the definition:
Money supply means the total volume of money held by the public at a particular point of time.
The public here means households, firms and all other users of money. It does not include the government, the RBI or the banking system, because they only create or keep money.

Step 3: Link it to what it contains:
It covers currency (notes and coins) held by the public and the demand deposits that the public holds with commercial banks.
The money held by banks and the government is left out to avoid counting the same money twice.

Final Answer:
Money supply is the total stock of money held by the public in the economy at a particular point of time.