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

Question

Quizplus · Accepted Answer

The monetary base is the sum of Federal Reserve notes (currency printed by the Federal Reserve), coins, and deposits of depository institutions (banks that hold reserves with the Federal Reserve). This is the definition of the monetary base used by the Federal Reserve. Options A, C, and D are incorrect because they include items that are not part of the monetary base, such as travelers' checks (Option D) or broader measures of money supply (Options A and C).

The Monetary Base Is the Sum of