Home › Karnataka PUC II › economics › money_and_banking › The 'high-powered money' (reserve money / moneta…
The 'high-powered money' (reserve money / monetary base) consists of
AGovernment securities held by the public
BCommercial bank deposits only
CCurrency held by the public + commercial banks' reserves with the RBI
DForeign exchange reserves only
Answer & Solution
Correct answer: C. Currency held by the public + commercial banks' reserves with the RBI
High-powered money = currency held by public + bankers' deposits with the RBI + 'other' deposits with RBI. It is the base on which the broader money supply is built through the money multiplier.
Related questions
If the RBI conducts an outright OMO purchase of government bonds, the immediate effect on A bank's balance sheet identity isWhy does the chapter describe a barter system as suffering from the 'double coincidence ofWhich is a QUALITATIVE tool of monetary policy used by the RBI?In the fictional balance sheet of the chapter, if CRR = 20% and initial reserves with the If CRR is raised, the immediate effect on money supply isThe 'repo rate' is the rate at whichOpen Market Operations (OMO) by the RBI refers to