Question

Arrange the following conditions from most to least liquid form: (A) Currency + Demand Deposit + Savings deposits with Post Office savings banks.
(B) Currency + Demand Deposit + Net time deposits of commercial banks + Total deposits with Post Office savings organizations.
(C) Currency + Demand Deposit.
(D) Currency + Demand Deposit + Net time deposits of commercial banks.

• A. (A), (B), (C), (D)
• B. (C), (A), (D), (B)
• C. (B), (A), (D), (C)
• D. (C), (B), (D), (A)

Hint:

Monetary aggregates: M1 = most liquid (Currency + Demand deposits), while broader measures (M2, M3, M4) are less liquid.

Answer 1

The Correct Option is B

Step 1: Recall liquidity concept.
Liquidity = how quickly an asset can be converted into cash without loss of value.
- Highest liquidity → Currency and demand deposits (most liquid).
- Then savings deposits.
- Then time deposits.
- Least liquid → broader aggregates with post office deposits.
Step 2: Order the options.
- (C) Currency + Demand Deposit → Most liquid (M1).
- (A) Currency + Demand + Savings deposits (Post Office) → Next liquid.
- (D) Currency + Demand + Net time deposits (M2/M3).
- (B) Currency + Demand + Net time + Post Office deposits (broadest, least liquid).
Step 3: Correct sequence.
Thus, order is: (C), (A), (D), (B).
Final Answer: \[ \boxed{(C), (A), (D), (B)} \]