Question:
‘High Powered Money’ (or Monetary Base) in an economy consists of:
(1) Total bank deposits only.
(2) Currency held by the public and reserves held by banks.
(3) All financial assets in the economy.
(4) Only the gold reserves of the Central Bank.
(5) The total value of government bonds.
Correct Answer:
(2)
Answer Explanation:
The Monetary Base ($M_0$ or $H$) is the most liquid money created by the Central Bank. It equals Currency in Circulation ($C$) + Bank Reserves ($R$).
Topic: Money and Banking Year: 2024
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