Question

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

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

Answer 1

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.