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Question

Which of the following correctly explains 'monetary base' of the economy?

A
Currency with the public + demand deposits in the banking system.
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B
Currency with the public + time deposits of the banking system.
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C
Currency in circulation + banker's deposits with RBI+ other deposits with RBI.
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D
None of the above
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Solution

The correct option is C Currency in circulation + banker's deposits with RBI+ other deposits with RBI.
The monetary base is the total amount of a currency that is either in general circulation in the hands of the public or in the commercial bank deposits held in the central bank's reserves.
Thus, Monetary base = Currency in circulation+ banker’s deposits with RBI+ other deposits with RBI.

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