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

Devon Ramirez

Business

23 June, 09:47

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.

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Answers (1)

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Mia Hickman · Answer 1

Answer: Option (A) is correct.

Explanation:

The monetary base contains two components that are currency with the public and reserves held by banks. It is also a measure of money supply which includes highly liquid currencies.

One of the component of monetary base is currency with the public which means that the total amount of money that is held by the general public and in circulation.

Other component of monetary base is the reserves that is held by the commercial banks. It includes the reserves that commercial banks are required to keep it with central bank.