Supply of money is best defined as the

Step 1: Analyze the question The question asks for the best definition of the supply of money in an economy.

Step 2: Explain the concept Money supply is the total stock of money available in an economy at a particular time. It includes:

• Currency in circulation (notes and coins held by the public), and
• Bank deposits (demand/current account deposits, and in broader measures, savings and time deposits).

In economics, this is commonly measured as M1 (narrow money) and M2 (broad money), which add deposits to currency in circulation.

Step 3: Evaluate each option

• A. Money in circulation plus bank deposits. This matches the standard definition of the total stock of money in the economy.
• B. Money given out as loans. This is only bank credit, which is one way money is created, not the whole money supply.
• C. Currency printed annually by the government. This is only a flow of new notes. It ignores existing money and bank deposits. In Nigeria, the Central Bank of Nigeria (CBN) issues currency, not "the government" directly.
• D. Money spent on consumer goods. This is consumption expenditure, not money supply.

Step 4: Answer

Step 5: Exam tip Remember: Money supply = Currency in circulation + Bank deposits. When you see "supply of money," think of a stock of money available, not just loans, printing, or spending.