The monetary base consists of:
A) currency held by the public, plus reserves held by banks.
B) all outstanding currency, plus reserves held by banks.
C) all outstanding currency, plus demand deposits.
D) all bank reserves.

Question

Quizplus · Accepted Answer

The monetary base includes currency held by the public and reserves held by banks. This is because the monetary base is the foundation for the banking system's ability to create money through the lending process. It does not include demand deposits or all bank reserves without the currency held by the public.

The Monetary Base Consists Of