economics hard Fill in the Blank

The total monetary base of an economy, which consists of currency held by the public plus the vault cash and reserves held by commercial banks with the central bank, is technically referred to as ___ Money or Reserve Money.

  1. India Debt Resolution Company Ltd (IDRCL)
  2. Paper Gold
  3. long
  4. High Powered (or Base / M0)

Answer: High Powered (or Base / M0)

High-Powered Money (denoted as M0 or Reserve Money) is the foundation upon which the entire banking system creates broader money supply (M1, M3). It represents the direct liabilities of the central bank (RBI). Any expansion in high-powered money, achieved through RBI's open market operations or forex purchases, gets multiplied through the commercial banking system to determine the total liquidity in the economy.

Topic Macroeconomics - Money
Exam Relevance UPSC Prelims, Banking, SSC
More economics Questions Back to all questions