What is High Powered Money?
High Powered Money refers to the currency issued by the central bank. It can be held by the public or by the commercial banks.
It is also called reserve money or monetary base. The term 'high-powered' is used because this money acts as a basis for credit creation in the economy. Commercial banks use this monetary base to create additional credit through the lending process.
Explanation
The textbook explicitly defines high-powered money in the context of money supply and the central bank's function of issuing currency. The key points are: (1) it is currency issued by the central bank, (2) it can be held by public or commercial banks, (3) it has alternative names - reserve money or monetary base, and (4) its significance lies in being the foundation for credit creation. This is a definition-based question requiring students to recall the exact meaning from the chapter.