Question

write the main components of high powered money.

Answer 1

Money supply means the total amount of money in an economy. The effective money supply consists mostly of currency and demand deposits.

Currency includes all coins and paper money issued by the government and the banks. Bank deposits (payable on demand) are regarded part of money supply and they constitute about 75 to 80 per cent of the total money supply in the US. Some economists also include near money, or such liquid assets as savings, deposits and government bills in the money supply. The total supply of money is determined by banks, the Federal Reserve, businessmen, the government and consumers.

Answer 2

Main components of high powered money.

Explanation:

• The terms high power money refers to the currency that has issued by the central government and the reserve bank and some part of this currency is kept for public and rest is for the reserves of capital by the RBI.

• This includes a sum of the reserves base for the expansion of the bank deposits and creation of the money supply, the main components of this money are the currency with the public (C), reserves of Commercial banks and another reserve (ER), bank deposits (D), Supply of money (M).

• It's important as base money, source of change Money Multiplier and as a Monetary Control mechanism.

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