Q. Consider the following statements:
1.Currency issued by the central bank, held by the public or by the commercial banks, is called high-powered money.
2.RBI performs a variety of developmental and promotional functions.
Which of the statements given above is/are correct?
Answer: C
Notes:
Explanation: 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.
- RBI Performs a variety of developmental and promotional functions under which it did set up institutions like IDBI, SIDBI, NABARD, NHB, etc.
Source: NCERT – Macro economics
