Which of the following is are correct regarding the High Powered Money 1 It is the total liability o...........

Economic Affairs Money Supply and Monetary Policy

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Which of the following is/are correct regarding the High Powered Money?

1. It is the total liability of the central monetary authority of the country.

2. It includes deposits of the Government and commercial banks with central monetary authority.

Select the correct answer using the code given below.

1 only

2 only

Both 1 and 2

Neither 1 nor 2

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Explanation:

High Powered Money: The total liability of the monetary authority of the country, 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.