Monetary base (base money)

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Updated: Aug 20, 2021

The part of the money supply which is eligible to count as reserves in the banking system. Some monetary theorists argue that if the monetary authorities can control the amount of base money the rest of the money supply will adjust automatically. How far this is true depends on how stable bank reserve ratios are, and on how far base money is also held outside the banking system, for example as notes and coin in general circulation.

Reference: Oxford Press Dictonary of Economics, 5th edt.



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James Knight
Editor of Education
James is the Editor of Education for Invezz, where he covers topics from across the financial world, from the stock market, to cryptocurrency, to macroeconomic markets.... read more.