Also termed the monetary base, the total of currency held by the nonbank public, vault cash held by banks, and Federal Reserve deposits of the banks. This contains the monetary components over which the Federal Reserve System has relatively complete control and is often used as a guide for the Fed's money control ability and monetary policy.
In
the context of supply of money, the concept of high powered money is more
prevalent in modern time. In the context of purchasing power of money, there
are two types of money. (1) High Powered Money (2) Low Powered Money.
High
Powered Money indicates the purchasing power of supply of money. The total purchasing
power of people depends on the growth rate and quantity of total supply of
money. From this point of view, money multiplier is considered in addition to
quantity of currency and bank money.
In
short, the increase in volume of money creates purchasing power in more or less
degree. The increase in supply of money that generates more purchasing power is
called high powered money. Financial institutions should take
high powered money
into consideration to
schedule stability in the country
along with development.