Which statement correctly explains why high-powered money is called the base of the money supply?

CA Foundation · Business Economics · MTP · January 2026
Which statement correctly explains why high-powered money is called the base of the money supply?
(A) A. It directly equals broad money
(B) B. It alone determines velocity of circulation
(C) C. It supports multiple expansion of bank deposits
(D) D. It includes only currency in circulation

Suggested Answer and Working Notes:

Correct Answer: Option (C)

C. It supports multiple expansion of bank deposits

Topics: Money Market

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