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Money and Banking — Economics STD 12 Humanities & Commerce — Question

Rajasthan BoardEnglish MediumSTD 12 Humanities & CommerceEconomicsMoney and Banking2 Marks
Question
What is High Powered Money?
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Answer

High Powered Money:

High powered money or monetary base refers to the money produced by R.B.I. and Government of India. Alternatively, total liability of monetary authority of the country and R.B.I. is called monetary base or high powered money. It consists of:

  1. Currency in the hands of public.
  2. Cash reserve of commercial banks.
  3. Other deposits with RBI.

So, to sum up, high powered money is:

H = C + R

Where,

  • H - High powered money.
  • C - Currency.
  • R - Cash Reserves of commercial banks.

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