Question

    High powered money

    comprises
    A Currency held by public + Cash reserves of banks Correct Answer Incorrect Answer
    B Currency held by public + Demand and time deposits + cash reserves of banks Correct Answer Incorrect Answer
    C Currency held by public + cash with Banks + Banker’s deposits with RBI + other deposits with RBI Correct Answer Incorrect Answer
    D Currency held by public + other deposits with RBI Correct Answer Incorrect Answer

    Solution

    High powered money or powerful money refers to that currency that has been issued by the Government and Reserve Bank of India. Some portion of this currency is kept along with the public while rest is kept as funds in Reserve Bank. High powered money is also known as secured money (RM) because banks keep with them Reserve Fund (R) and on the bases of this Demand deposits (DD) are created. Since the bases of creation of credit is Reserve Fund (R) and R is obtained as a part of high powered money (H) Security fund so high powered money is termed as Base money . The components of high powered money are: ü Currency with the public ü Other Deposits with RBI ü Cash with Banks Banker’s Deposits with RBI

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