Question

In monetary terminology, what is called the 'monetary base' or 'high powered money' ?

• A. the total assets of RBI
• B. the total liability of RBI
• C. the total debt of the government
• D. the total foreign exchange of RBI

Answer 1

The Correct Option is B

The term "monetary base" or "high powered money" refers to the fundamental components of a country's money supply that are under the control of a central authority, like the Reserve Bank of India (RBI). It primarily consists of:

1.	Currency in circulation among the public.
2.	Bankers' deposits with the central bank.
3.	The reserves held by commercial banks with the central bank.

In essence, the monetary base is represented on the balance sheet of a central bank as its liabilities, primarily because it includes the currency issued by the central bank and the reserves held by it. Therefore, when we consider the options provided, the term that correctly describes the "monetary base" is the total liability of RBI.

Thus, the correct option is: the total liability of RBI.