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Business Studies

Public Deposit

High powered ...

Question

High powered money consists of _________________.

A

Currency and coins held by the public

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B

Currency, cash reserves with banks and demand deposits

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C

Currency held by public and cash reserves with banks

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D

Currency and demand deposits

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Solution

The correct option is B Currency, cash reserves with banks and demand deposits
High powered money consists of currency and coins held by the public and deposits held by government and commercial banks. High powered money is a total liability of the monetary authority of the country.

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Q. High powered money includes the cash reserves of commercial banks and the currency held by public.

Q. Discuss the meaning of:
(i) Currency and coins with public;
(ii) Demand deposits held by commercial banks.

Q. Explain the concepts of:
(i) Currency and coins with public;
(ii) Demand deposits held by commercial banks.

Q. Which of the following statements about banking operations is correct as they help banks to run their shops?
A. The public holds as much currency (M) as it desires to hold with it and therefore any additional money earned by it is placed in the form of deposits with banks.
B. The banks lend all the deposits received by them from public up to the minimum legal cash reserve ratio requirement determined by the RBI. It means banks do not keep any excess cash reserves with themselves.
C. The minimum legal Cash Reserve ratio is set by the RBI.
D. Bank's assets are only in the form of Cash Reserves and loans and its liabilities comprise only of the demand deposits.

Q. In terms of money supply,

Currency note and coins in circulation + Net demand deposits held in commercial banks = _____

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