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Comparing Numbers

Q. Consider t...

Question

Q. Consider the following:

Which of the above forms a part of high-powered money?

A

1 and 2 only

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B

1, 3 and 4 only

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C

3 and 4 only

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D

1, 2, 3 and 4

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Solution

The correct option is A 1 and 2 only
Explanation:

High-powered money is M0. It consists of Currency in Circulation + banker’s deposit & other deposits with RBI.

Notes:

M0 = Currency in Circulation + banker’s deposit & other deposits with RBI.

M1 = Currency held by the public + demand deposits with the banks + other deposits held by some people with RBI.

M2 = M1 + Post-Office Savings deposits

M3 = M1 + Time Deposits with the banks

M4 = M3 + Post office savings deposits

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