ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Financing government spending with taxes
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The finance of government spending through a Treasury sale of bonds that are then purchased by the Central Bank
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Financing government spending by selling bonds to the public, which pays for the bonds with currency
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Financing government spending by selling bonds to the public, which pays for the bonds with checks
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Detailed explanation-1: -High powered money is the liability of the monetary authority of the country. This is also called the monetary base and is created by the RBI.
Detailed explanation-2: -The correct answer is Money multiplier. Key Points. The money multiplier is defined as the ratio of the stock of money to the stock of high powered money in an economy, viz. M/H.
Detailed explanation-3: -Contractionary Monetary Policy Also known as tight monetary policy, contractionary policy decreases a nation’s money supply to curb rampant inflation and keep the economy in balance. A central bank will likely hike interest rates and try to slow the growth of money and prices.
Detailed explanation-4: -The monetary base has traditionally been considered high-powered because its increase will typically result in a much larger increase in the supply of demand deposits through banks’ loan-making, a ratio called the money multiplier.