ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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MONEY AND BANKING- Currency Too Costly to Hold

Currency: Too Costly to Hold? MONETARY stock M, recorded a fall of Rs 43 crore or 0.1 per cent in September 1985 in contrast to an increase of Rs 62 crore last year, The decline was accounted for by currency With the public which showed a contraction of Rs 297 crore against an increase of Rs 231 crore in September last year. An increase of Rs 477 crore in time deposits in September 1985 resulted in an expansion of Rs 434 crore or 0.4 per cent in M3 A significant aspect of the current monetary situation is the behaviour of the currency component. Currency with the public, which continues to be the most preferred medium of transactions, has shown a persistent contraction in the current year, contrasted with the significant expansion in 1984-85. This probably reflects the economy effected in the use of currency as a medium of exchange in view of the prevailing higher opportunity cost, and the rapidity with which it is being converted into other forms of near-money assets.

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