The monetary base is the sum of
A) currency and reserves of depository institutions.
B) currency, travelers' checks, and checking deposits.
C) currency only.
D) M1 and M2.

Question

Quizplus · Accepted Answer

The monetary base includes currency (notes and coins in circulation with the public and in the vaults of banks) and the reserves of depository institutions held at central banks. These reserves are not part of the money supply accessible to the public but are the basis upon which banks can create money through lending. Choices B, C, and D include components that are not part of the monetary base but rather parts of broader monetary aggregates.

The Monetary Base Is the Sum of