CA Foundation P4 · Chapter 8 · Question 9 of 15
Reserve money (high-powered money) consists of:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Currency in circulation, bankers' deposits with the RBI and other deposits with the RBI
Explanation
Reserve money (M0) = currency in circulation + bankers' deposits with RBI + 'other' deposits with RBI. It is called high-powered money because the banking system creates a multiple of it as money supply.
More Money Market MCQs
- Q11An increase in the cash reserve ratio (CRR) will, other things being equal:
- Q12The repo rate is the rate at which:
- Q13Under the amended RBI Act, 1934, the policy repo rate required to achieve the inflation target is determined by:
- Q14In the Baumol-Tobin inventory approach to transactions demand for money, an increase in the interest rate will:
- Q15Milton Friedman's restatement of the quantity theory treats the demand for money as: