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Home Questions BH2A4ZNV5U
Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: Money and Banking

Question:

Match List-I with List-II.

List-I List-II
(A) High powered money (I) $\frac{1}{\text{Cash Reserve ratio}}$
(B) Central Bank (II) Fixed by the RBI
(C) Money multiplier (III) An apex bank of the country
(D) Cash Reserve Ratio (IV) Currency issued by central bank

Choose the correct answer from the options given below :

Options:

(A)-(II), (B)-(III), (C)-(IV), (D)-(I)

(A)-(II), (B)-(III), (C)-(I), (D)-(IV)

(A)-(III), (B)-(II), (C)-(IV), (D)-(I)

(A)-(IV), (B)-(III), (C)-(I), (D)-(II)

Correct Answer:

(A)-(IV), (B)-(III), (C)-(I), (D)-(II)

Explanation:

The correct answer is option (4) : (A)-(IV), (B)-(III), (C)-(I), (D)-(II)

List-I List-II
(A) High powered money (IV) Currency issued by central bank
(B) Central Bank (III) An apex bank of the country
(C) Money multiplier (I) $\frac{1}{\text{Cash Reserve ratio}}$
(D) Cash Reserve Ratio (II) Fixed by the RBI

Explanation:

High powered money (HPM): This refers to the base money supplied by the central bank in the form of currency (notes and coins) held by the public and commercial banks. (Not Cash Reserve Ratio).

Central Bank: The apex monetary institution of a country responsible for monetary policy, issuing currency, regulating banks, and managing foreign exchange reserves.

Money multiplier: This concept explains how commercial banks can create credit and expand the money supply based on the reserves they hold. It is inversely related to the Cash Reserve Ratio (CRR).

Cash Reserve Ratio (CRR): The percentage of deposits that banks must hold as reserves with the central bank. It is a monetary policy tool used by the central bank to control the money supply in the economy. The CRR is fixed by the RBI (Reserve Bank of India).

 

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