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In the context of the money supply in an economy, High Powered Money includes
- a)Interbank deposits, which a commercial bank holds in other commercial banks.
- b)deposits held by the Government of India and commercial banks with RBI only.
- c)only the currency circulation and the public and vault cash of commercial banks.
- d)Both (b) and (c).
Correct answer is option 'D'. Can you explain this answer?
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Verified Answer
In the context of the money supply in an economy, High Powered Money ...
- High-powered money
- The total liability of the monetary authority of the RBI is called the monetary base or high powered money. It consists of currency (notes and coins in circulation with the public and vault cash of commercial banks) and deposits held by the Government of India and commercial banks with RBI.
- It is also called as ‘reserve money’ or ‘monetary base’ as it acts as a basis for credit creation.
- It is denoted by M0.
- M1
- It is also called narrow money.
- It includes currency with public, demand deposit in all banks (e.g. current account, savings account) and Other deposits with RBI
Most Upvoted Answer
In the context of the money supply in an economy, High Powered Money ...
High Powered Money in an Economy
High Powered Money refers to the monetary base of an economy. It is also known as Reserve Money or Base Money. High Powered Money includes the following:
Deposits Held by the Government of India and Commercial Banks with RBI Only
The Government of India and commercial banks hold deposits with the Reserve Bank of India (RBI) for various purposes, including statutory reserves and liquidity requirements. These deposits are included in High Powered Money.
Currency Circulation and the Public and Vault Cash of Commercial Banks
Currency circulation refers to the total amount of currency notes and coins in circulation in an economy. Public and vault cash of commercial banks refer to the cash held by commercial banks in their vaults and with the central bank. These components are also included in High Powered Money.
Interbank Deposits Held in Other Commercial Banks
Interbank deposits are deposits made by one commercial bank in another commercial bank. These deposits are not included in High Powered Money as they do not add to the monetary base of the economy.
Conclusion
In conclusion, High Powered Money includes deposits held by the Government of India and commercial banks with RBI, currency circulation, and the public and vault cash of commercial banks. Interbank deposits held in other commercial banks are not included in High Powered Money.
High Powered Money refers to the monetary base of an economy. It is also known as Reserve Money or Base Money. High Powered Money includes the following:
Deposits Held by the Government of India and Commercial Banks with RBI Only
The Government of India and commercial banks hold deposits with the Reserve Bank of India (RBI) for various purposes, including statutory reserves and liquidity requirements. These deposits are included in High Powered Money.
Currency Circulation and the Public and Vault Cash of Commercial Banks
Currency circulation refers to the total amount of currency notes and coins in circulation in an economy. Public and vault cash of commercial banks refer to the cash held by commercial banks in their vaults and with the central bank. These components are also included in High Powered Money.
Interbank Deposits Held in Other Commercial Banks
Interbank deposits are deposits made by one commercial bank in another commercial bank. These deposits are not included in High Powered Money as they do not add to the monetary base of the economy.
Conclusion
In conclusion, High Powered Money includes deposits held by the Government of India and commercial banks with RBI, currency circulation, and the public and vault cash of commercial banks. Interbank deposits held in other commercial banks are not included in High Powered Money.
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In the context of the money supply in an economy, High Powered Money includesa)Interbank deposits, which a commercial bank holds in other commercial banks.b)deposits held by the Government of India and commercial banks with RBI only.c)only the currency circulation and the public and vault cash of commercial banks.d)Both (b) and (c).Correct answer is option 'D'. Can you explain this answer?
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