The monetary base consists of
A) currency in circulation and reserves.
B) government securities held by the Fed and discount loans.
C) government securities held by the Fed and currency in circulation.
D) discount loans and reserves.

Question

Quizplus · Accepted Answer

The monetary base is defined as the sum of currency in circulation plus bank reserves held at the Fed. Therefore, the correct option is A, as it includes both currency in circulation and reserves in its definition. Option B includes government securities held by the Fed as part of the monetary base, but this is incorrect. Option C includes only currency in circulation and government securities, which is also incorrect. Option D includes discount loans, which are not part of the monetary base definition.

The Monetary Base Consists of