Question

What is High Powered Money?

Hint:

High Powered Money plays a vital role in influencing the money supply and credit creation in the economy.

Answer 1

Step 1: Understanding High Powered Money.
High Powered Money, also known as Base Money or Reserve Money, refers to the total currency in circulation in the economy, including the currency held by the public and the reserves held by commercial banks with the central bank. It is the money that the central bank uses to control money supply in the economy.

Step 2: Conclusion.
Thus, High Powered Money forms the foundation of the monetary base in an economy, which is used by commercial banks to create credit.