Macroeconomics (9th Edition)
Macroeconomics (9th Edition)
9th Edition
ISBN: 9780134167398
Author: Andrew B. Abel, Ben Bernanke, Dean Croushore
Publisher: PEARSON
Question
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Chapter 14, Problem 1RQ
To determine

To know:Definition of monetary base and it’s difference with money supply.

Expert Solution & Answer
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Explanation of Solution

Money base or high powered money is the amount of currency in circulation, that is, amount of currency held by general public plus money held by commercial banks and reserves of commercial banks held by central bank.

Money supply is also calculated using the sum of currency in the economy. The sum of that currency is added to bank deposits held by general public.

The money supply includes the monetary base.

Economics Concept Introduction

Introduction:

Money supply is the total cash or readily available cash available in economy. It includes cash in hand and demand deposits.

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