How Do You Spell MONETARY BASE?

1. The monetary base, also known as the high-powered money or money base, refers to the total amount of money that is in circulation within an economy. It comprises the physical currency in the form of banknotes and coins issued by the central bank and the commercial banks' cash holdings deposited with the central bank. In simpler terms, it represents the sum of money issued by the central bank that is available to the public and banks for transactions.

   The monetary base serves as the foundation for the money supply within an economy. It is the starting point for the creation of credit and money by the commercial banking system through the process of fractional reserve banking. When commercial banks create loans and extend credit to individuals and businesses, they do so by essentially multiplying the monetary base, thereby increasing the overall money supply.

   As a monetary policy tool, the central bank can influence the monetary base to control inflation and stimulate or restrain economic growth. By adjusting the level of reserves held by commercial banks or by engaging in open market operations such as buying or selling government securities, the central bank can impact the monetary base directly, which can then have a multiplier effect on the overall money supply.

   In summary, the monetary base represents the total amount of money issued by the central bank and held by the public and commercial banks, which serves as the foundation for the creation of credit and the money supply within an economy.

Common Misspellings for MONETARY BASE

The term "monetary base" is composed of two words: "monetary" and "base".

The word "monetary" comes from the Latin word "monetarius", which relates to the minting of coins. It is derived from the Latin word "monetarius", meaning "money".

The word "base" traces its origins to the Old French word "bas", meaning "low or lowly". It evolved from the Latin word "basis", which also means "foundation" or "support".

When combined, the phrase "monetary base" refers to the foundation or fundamental elements of a monetary system, representing the total amount of money issued by a central bank of a country, including physical currency (notes and coins) as well as the reserves held by commercial banks at the central bank.