Narrow Money (M0) includes which of the following?

• A. Notes and coins in use & amts in accounts held at the central bank
• B. All private bank deposits
• C. Loans to households
• D. Government securities

Answer: (A)

Narrow money is the most liquid form of money: the currency that is actually circulating and the reserves that banks hold with the central bank. This base money is what can be used immediately for payments, so it sits at the foundation of the money supply.

The option describing notes and coins in use plus the amounts held in accounts at the central bank matches this definition exactly, as it covers both physical currency and bank reserves.

Other items aren’t included in this measure. Private bank deposits are part of broader money measures like M1 or M2, since they are funds deposited in banks that can be withdrawn or transferred. Loans to households are not money themselves—they are claims on borrowers and do not constitute currency or reserves. Government securities are financial assets and, while they influence liquidity and monetary policy, they are not part of base money.