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Questions
What is high-powered money?
What is meant by high-powered money?
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Solution 1
High-powered money is the total liability of the monetary authority of the country. This is also called the monetary base and is created by the RBI. High-powered money includes currency (notes and coins), deposits with the government, and reserves of commercial banks with the 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
Solution 2
The currency produced by the central bank (Reserve Bank of India and government of India in India) is called high-powered money.
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