how money supply is determined and what is the normal supply of money in a developing economy?

It is the measure of purchasing power in an economy, and is defined in different ways in different countries. Normally, the "narrow" definition of money supply is:

notes and coins in circulation in the national currency;

bank deposits created through the credit mechanism which are available on demand - basically current accounts formed from overdrafts and loans;

excess mortgages where borrowers have been loaned more than required for the purchase and servicing of real estate assets.

There is a broader definition used by many countries, which will include in addition:

paper assets which can be regarded as near-money, including government stock and bonds which are close to maturity, national savings certificates and the like;

certain physical assets which can be converted to cash very easily such as official gold holdings.

In a developing economy such as India there are often many different definitions, to cover a range of policy situations:

Reserve Money

(M0): Currency in circulation + Bankers’ deposits with the Reserve Bank of India [RBI] + ‘Other’ deposits with the RBI = Net RBI credit to the Government + RBI credit to the commercial sector + RBI’s claims on banks + RBI’s net foreign assets + Government’s currency liabilities to the public – RBI’s net non-monetary liabilities.

M1: Currency with the public + Deposit money of the public (Demand deposits with the banking system + ‘Other’ deposits with the RBI).

M2: M1 + Savings deposits with Post office savings banks.

M3: M2+ Time deposits with the banking system = Net bank credit to the Government + Bank credit to the commercial sector + Net foreign exchange assets of the banking sector + Government’s currency liabilities to the public – Net non-monetary liabilities of the banking sector (Other than Time Deposits).

M4: M3 + All deposits with post office savings banks (excluding National Savings Certificates).

In India, especially, precious metal holdings such as gold, silver and platinum, are excluded because of the very high level of unauthorised private holdings.

What you regard as normal depends on your situation in the selling-purchasing hierarchy of a country. For ordinary policy decisions and everyday transactions, the "narrow" definition is sufficient. Big business and the central bank will have regard to broader definitions because they must control more than just the selling and purchasing of goods and services.

OK?

It depends, it is usually the left over money after all goods and services are paid for, usually developing economies don't have a normal money supply, because they spend it.

They will go lower. Suze Orman has predicted that you could see interest rates for 15 year mortgages go down in the 2's%. She has always been right. And, there are some banks out there that are actually charging you to hold your money in a savings account.

Diapason answer is good one and mine too is same.