The monetary base is the sum of
A) currency, travelers' checks, and checking deposits
B) M1 and M2
C) currency
D) Federal Reserve notes, coins, and deposits of depository institutions

Question

Quizplus · Accepted Answer

The monetary base refers to the sum of Federal Reserve notes (paper money), coins, and deposits held by depository institutions at the Federal Reserve. This is also referred to as high-powered money or reserve money. Thus, the correct answer is D. The other options (A, B, C) are incorrect as they do not include all the components of the monetary base.

The Monetary Base Is the Sum of