Monetary Base
The monetary base is the total amount of a currency that is either in general circulation in the hands of the public or in the commercial banking system. It is also known as the money supply, and it is the total amount of money that is available to be used in the economy. The monetary base is made up of coins, paper money, and bank deposits held by the central bank. It is the foundation of the money supply and is used to influence the economy by controlling the amount of money available for lending and spending.
History of the Monetary Base
The concept of the monetary base has been around since the early days of banking. In the United States, the Federal Reserve System was established in 1913 and it was given the power to control the money supply. The Federal Reserve System is responsible for setting the monetary base, which is the total amount of money in circulation. The Federal Reserve System can increase or decrease the money supply by buying or selling government securities, which affects the amount of money available for lending and spending.
The monetary base is also affected by the actions of the commercial banking system. Banks can increase or decrease the money supply by lending or borrowing money. When banks lend money, they create new deposits, which increases the money supply. When banks borrow money, they reduce the money supply. The Federal Reserve System can also influence the money supply by setting the interest rate, which affects the amount of money that banks are willing to lend.
Table of Comparisons
| Type of Money | Amount |
|---|---|
| Coins | $1.5 trillion |
| Paper Money | $1.2 trillion |
| Bank Deposits | $2.7 trillion |
| Total | $5.4 trillion |
Summary
The monetary base is the total amount of money in circulation in the economy. It is made up of coins, paper money, and bank deposits held by the central bank. The Federal Reserve System is responsible for setting the monetary base, which is the total amount of money in circulation. The Federal Reserve System can increase or decrease the money supply by buying or selling government securities, and the commercial banking system can also influence the money supply by lending or borrowing money. For more information about the monetary base, you can visit the Federal Reserve System website or the U.S. Treasury website.
See Also
- Money Supply
- Federal Reserve System
- Interest Rate
- Banking System
- Government Securities
- U.S. Treasury
- Inflation
- Deflation
- Monetary Policy
- Currency Exchange
