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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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