Correct Option
The correct option is 2 and 3 only.
Explanation
The money supply is the total volume of currency and other liquid instruments held by the public at a specific point in time in an economy. It is a crucial macroeconomic concept used to analyze liquidity and inflation.
Statement-wise Analysis
- Statement 1 is Incorrect: In economics, variables are classified as either stock or flow. A flow variable is measured over a period of time (e.g., GDP, income). A stock variable is measured at a specific point in time. Since money supply is calculated at a particular moment (e.g., as of March 31st), it is a stock variable.
- Statement 2 is Correct: The standard definition of money supply refers to the total stock of money in circulation among the public at a particular point in time. It represents the purchasing power available to the public for transactions and settlement of debts.
- Statement 3 is Correct: In the context of monetary economics, the term "public" refers only to the users of money (households and firms). It explicitly excludes the producers of money, which are the Government and the Banking System (including the Central Bank). Therefore, money held in government treasuries or bank vaults is not counted in the money supply.
Key Takeaway
Money Supply is a stock concept that measures the total currency held by the public (users of money) at a specific point in time, strictly excluding the holdings of the money-creating sector (Government and Banks).