M₁ and M₂ are narrow money as they includes currency plus demand deposits in banks and other deposits.

Stagflation is a combination of stagnant economic growth, high unemployment and high inflation.

(i) Plastic money refers to the hard plastic cards used everyday in place of actual bank notes.
(ii) They aim at removing the need for carrying cash to make transactions.
(iii) (E.g.) Cash cards, Credit cards, Debit cards, Pre-paid Cash cards, Store cards, Forex cards and Smart cards.

(i) Surplus goods were exchanged for money which in turn was exchanged for other needed goods.
(ii) Goods like furs, skins, salt, rice, wheat, utensils, weapons were used as money

(i) Money is, what money does - Walker:
(ii) Money can be anything that is generally acceptable as a means of exchange and at the same time acts as a measure and a store of value. - Crowther.

M₁ = Currency, Coins and demand deposits.
M₂ = M₁ + Saving deposits with post office savings banks.
M₃ M₂ + Time deposits of all commercial and cooperative banks.
M₄ = M₃ + Total deposits with post offices.
M₁ and M₂ are known as narrow money.
M₃ and M₄ are known as broad money.
The graduations are in decreasing order of liquidity.

(i) It is the slowing down the rate of inflation by controlling the amount of credit (bank loan, hire purchase) available to consumers without causing more unemployment.
(ii) It is defined as the process of reversing inflation without creating unemployment or reducing output in the company.

(i) On the basis of speed there are four types of inflation - Creeping inflation, Walking Inflation, Running inflation, Galloping inflation.
(ii) Demand-Pull inflation, Cost-Push inflation.
(iii) On the basis of inducement - currency inflation, credit inflation, deficit induced inflation, profit induced inflation, scarcity induced inflation, tax induced inflation.

Currency Deposit Ratio (CDR):
It is the ratio of money held by the public in currency to that they hold in bank deposits.
Reserve deposit Ratio (RDR):
Reserve Money consists of vault cash in banks and deposits of commercial banks with RBI.
Cash Reserve Ratio (CRR):
It is the fraction of deposits the banks must keep with RBI.
Statutory Liquidity Ratio (SLR):
It is the fraction of the total demand and time deposits the commercial bank must keep with itself.

(i) After the barter system and commodity money system, modern money systems evolved.
(ii) Metallic standard is the premier one.
(iii) Some kind of metal, gold or silver is used to determine the standard value of the money and currency.
(iv) Standard coins made out of the metal are the principal coins used under the metallic standard.
(v) These Standard coins are full bodied or full weighted legal tender.
(vi) Their face value is equal to their intrinsic metal value.

Boom or Prosperity:
1. The employment and the movement of the economy beyond full employment is the characterized features of boom.
2. There is hectic activity, money wages rise, profits increase, interest rates go up, demand for bank credit increases.
3. There is all round optimism.
Recession:
1. The turning point from boom condition is recession.
2. Failure of a company or bank brings a phase of recession.
3. Investments are drastically reduced, production falls, income and profits decline.
4. There is panic in the stock market and business is dull.
5. Liquidity preference of the people rises and money market becomes tight.
Depression:
1. The level of economic activity becomes extremely low.
2. Firms incur loss and close down resulting in unemployment.
3. Interest rate, profits, wages are low.
4. Agricultural class and wage carners are badly affected.
5. Banks do not lend to businessmen.
6. The extreme point of depression is called as "trough".
7. Keynes said that autonomous investment of the government can help the economy to come out of depression.
Recovery:
1. After depression, recovery sets in the upswing.
2. It begins with the revival of demand for capital goods.
3. The demand slowly picks up and in due course there is more production, profit, income, wages and employment.
4. Recovery may be initiated by innovation or investment or by government.

(i) Primary Functions:
Medium of exchange:
(i) Money has general acceptability and all exchanges take place in terms of money.
(ii) First, money is got through sale of goods or services.
(iii) Later, money is used to buy goods and services.
(iv) Thus, in the modern exchange system money acts as the intermediary in sales and purchases.
Measure of value
(i) Money measures the value of goods and services.
(ii) Prices of all goods and services are expressed in terms of money.
(iii) Since all the values are expressed in terms of money, it is easier to determine the rate of exchange between various types of goods in the community.
(ii) Secondary Functions:
Store of value:
(i) Savings is done in terms of money.
(ii) Money is a store of wealth, as it can be easily converted into other marketable assets such as land, machinery, plant.
Standard of Deferred Payments:
(i) Borrowing and lending is done in money.
Means of Transferring Purchasing Power:
(i) The field of exchange went on extending with growing economic development.
(ii) The exchange of goods is now. extended to distant lands.
(iii)  So it is necessary to transfer purchasing power from one place to another.
(iii) Contingent Functions:
Basis of the Credit System:
(i) Business transactions are either in cash or on credit.
(ii) A depositor uses cheques only when there are sufficient funds in his account.
(iii) The commercial banks create credit on the basis of adequate cash reserves.
(iv) Money is at the back of all credit.
Money facilitates distribution of National Income:
(i) Money is used in the distribution of income as rent, wage, interest and profit.
Equalize Marginal Utilities and Marginal Productivities:
(i) Consumer gets maximum utility only if he incurs expenditure on various commodities in such a  manner as to equalize marginal utilities accruing from them.
(ii) Here, money plays an important role, because the prices of all commodities are expressed in money.
(iii) Money helps to equalize marginal productivities of various factors of production.
Increases Productivity of Capital:
(i) Money is the most liquid form of capital.
(ii) It can be put to any use.
(iii) So it can be transferred from the less productive to the more productive uses.
(iv) Other Functions:
Maintains Repayment Capacity:
(i) Money has general acceptability.
(ii) To maintain its repayment capacity, every firm has to keep assets in the form of money.
(iii) Firms, banks, insurance companies and governments have to keep some liquid money (i.e., cash) to maintain their repayment capacity.
Represents Generalized
Purchasing Power:
(i) Purchasing power kept in terms of money can be put to any use.
Gives liquidity to Capital:
(i) Money is the most liquid form of capital & so can be put to any use.

(b) Both A and R is true and R is the correct explanation to A

(a) Both A and R is true and R is correct explanation to A