Question

Consider the following Table. 

Based on the given data, the average Broad Money Multiplier for the period April - June is _________ (round off to three decimal places).

Hint:

The Broad Money Multiplier helps measure the effect of the currency in circulation and deposits on the total money supply.

Answer 1

Correct Answer: 5.3

The formula for the Broad Money Multiplier is given by: \[ \text{Broad Money Multiplier} = \frac{\text{Currency with the Public} + \text{Demand Deposits}}{\text{Currency in Circulation} + \text{Other Deposits with the RBI} + \text{Bankers' Deposits with the RBI}} \] Now, calculate the multiplier for each month and take the average:
For April: \[ \text{Multiplier}_{\text{April}} = \frac{2425 + 1582}{2523 + 40 + 457} = \frac{4007}{3020} \approx 1.327 \] For May: \[ \text{Multiplier}_{\text{May}} = \frac{2513 + 1565}{2611 + 42 + 468} = \frac{4078}{3121} \approx 1.307 \] For June: \[ \text{Multiplier}_{\text{June}} = \frac{2567 + 1573}{2661 + 39 + 484} = \frac{4140}{3184} \approx 1.301 \] Now, average the three multipliers: \[ \text{Average Multiplier} = \frac{1.327 + 1.307 + 1.301}{3} = 1.312 \] Thus, the average Broad Money Multiplier for the period April - June is \(1.312\).