Which of the following pairs is correctly matched?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Reserve money – Another name for high-powered money
Currency issued by the central bank, held by the public or by banks, has three names: high-powered money, reserve money and monetary base.
Option (1) Aggregate monetary resources – M1 — Incorrect. Aggregate monetary resources is M3, the most commonly used measure.
Option (2) Narrow money – M3 and M4 — Incorrect. M3 and M4 are broad money. M1 and M2 are narrow money.
Option (3) Monetary base – Broad money — Incorrect. Monetary base is high-powered money. Broad money also includes time deposits.
Option (4) Reserve money – Another name for high-powered money — Correct. Both names stand for the currency issued by the central bank.
NCERT (2026-27): “Central bank … From the point of view of money supply, we need to focus on its function of issuing currency. This currency issued by the central bank can be held by the public or by the commercial banks, and is called the ‘high-powered money’ or ‘reserve money’ or ‘monetary base’ as it acts as a basis for credit creation.” “Legal Definitions: Narrow and Broad Money … M1 and M2 are known as narrow money. M3 and M4 are known as broad money. These measures are in decreasing order of liquidity. M1 is most liquid and easiest for transactions whereas M4 is least liquid of all. M3 is the most commonly used measure of money supply.” Glossary: “Aggregate monetary resources – Broad money without time deposits of post office savings organisation (M3).” |