Question

______ is the total liability of the monetary authority of the country.

Options

• Legal tender

• Fiat money

• High powered money

• None of the above

Answer 1

High-powered money is the total liability of the monetary authority of the country.

Explanation:

The complete obligation of the country's monetary authority is high-powered money.' The RBI creates this, which is also known as the monetary basis. Currency (notes and coins), government deposits, and commercial bank reserves with the RBI are all examples of high-powered money. To summarise, high-powered money is

H = C + R

Where

H = High powered money

C = Currency

R = Cash Reserves of commercial banks.