Economics-For Managers

The chapter started with a brief discussion of the Indian Financial System and the providers of financial services. Later, the services and functions of banks were also discussed. Money supply and various components of money supply were discussed at length. Various measures of monetary aggregates i.e. M1, M2, M3 and M4 were also examined.

The two approaches for determining the money supply, i.e., the multiplier approach and the structural approach, were analyzed. We then examined the process of creation of money and saw how the multiple expansion of money takes place.

The chapter also discussed various determinants of money supply. The behavior of the public and commercial banks when there is a change in the money supply was also noted.

The chapter concluded with a discussion of the process for determining the equilibrium in the money markets.