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    Question

    The total liability of the monetary authority of India

    i.e. RBI, is included in which of the following?
    A Monetary base Correct Answer Incorrect Answer
    B High powered money Correct Answer Incorrect Answer
    C Narrow Money Correct Answer Incorrect Answer
    D Both (a) and (b) Correct Answer Incorrect Answer
    E Both (a) and (c) Correct Answer Incorrect Answer

    Solution

    Monetary base and high-powered money both include the total liability of RBI ·         The Monetary base includes bank reserve and currency in circulation. ·         High Power Money (Reserve Money or Base Money) – High power money is the base of money supply expansion in the economy. ·         High Power Money = C + OD + CR. C = Currency with the public OD = Other Deposits of the general public with the RBI (insignificant) CR = Cash Reserves of banks which consists of (i.) Cash with banks themselves and (ii) Bankers deposits with RBI.

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