Increases or decreases in the monetary base eventually become corresponding increases or decreases in the money supply.

Question

Quizplus · Accepted Answer

This is because the monetary base, which includes currency in circulation and reserves held by banks at the central bank, serves as the foundation for the money supply. When the monetary base increases or decreases, it has a ripple effect throughout the banking system, leading to changes in the money supply.

Increases or Decreases in the Monetary Base Eventually Become Corresponding