Answer to Question #115494 in Macroeconomics for Harshita

Question

To what extent high powered money affect money supply?
What are the uses of private savings in economy?

Answer 1

High-powered money is the sum of commercial bank reserves and currency (notes and coins) held by the public. High-powered money is the base for the expansion of bank deposits and creation of the money supply, and it is about 15 percent of the money supply.

Private saving is the amount of income that households have left after paying their taxes and paying for their consumption. It either creates the supply of loanable funds, or can be invested in some business.