The term 'Monetary Base' or 'High-Powered Money' consists of:
A. Only time deposits
B. Currency with public and reserves of banks with RBI
C. Only demand deposits
D. Only government securities
Answer: Option B
Solution (By JKSSB Mock Tests)
High-powered money (monetary base) consists of currency held by the public and the reserves (cash and deposits) of commercial banks with the central bank.
Explanation:
Government borrowing can raise interest rates (financial crowding out) and, in an open economy, appreciate the currency, thereby reducing net exports (international crowding out).
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