Money injected by the monetary authority in the economy, which consists mainly of currency, is called:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → High powered money
The currency put into the economy by the central bank is the base on which banks create credit. It is called high powered money.
Option (1) Broad money — Incorrect. Broad money is narrow money plus time deposits (M3 and M4).
Option (2) Aggregate monetary resources — Incorrect. This is another name for M3.
Option (3) Narrow money — Incorrect. Narrow money is currency plus demand deposits held by the public.
Option (4) High powered money — Correct. It is money injected by the monetary authority.
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.” Glossary: “High powered money - Money injected by the monetary authority in the economy. Consists mainly of currency.” |