Consider the following statements regarding the High Powered Money It is the total liability of Mone...........

Indian Economic System(PCS) Money and banking

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Consider the following statements regarding the High Powered Money:

It is the total liability of Monetary Authority of India.
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.
The deposits are not refundable by RBI on demand from deposit-holders. Which of the above statement(s) is/are correct?

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PCS Previous year General Studies paper (2013)

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Explanation:

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. The following are the important components which determine high power money:

1. Currency with the public

2. Other Deposits with RBI

3. Cash with Banks

4. Banker’s Deposits with RBI.

High powered Money (H) includes currency with Public (C), important reserves of Commercial banks and other reserve (ER).