What do you mean by high powered money? what are the sources of change in it?
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In simple terms High Powered Money (HPM) is the net or total liability of the monetary authority of any nation......in India it is the liability of RBI .
It is simply the sum of all currency in circulation with the people of country , cash kept in the commercial bank vaults along with the deposits of govt. of the country and commercial banks.
The term liability basically means that when people/govt/commercial banks produce the currency/claims....the RBI has to pay value equal to currency/claim.
It is simply the sum of all currency in circulation with the people of country , cash kept in the commercial bank vaults along with the deposits of govt. of the country and commercial banks.
The term liability basically means that when people/govt/commercial banks produce the currency/claims....the RBI has to pay value equal to currency/claim.
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High powered money is the money that is issued and regulated through Government and Reserve Bank.It is also denoted as powerful money.Some section of this money is held by Reserve bank and other section is held by public.
According to the question,high powered money is regulated through Reserve bank thus, major power over this money is possessed by Reserve bank .Thus, modification or any other changes can be done by Reserve bank and then government can take step towards it.
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What is high-powered money?
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