monetary base


Usually, the currency and central bank deposits that together provide the base for the money supply under fractional reserve banking. Also defined as the central bank assets the acquisition of which creates this monetary base by injecting domestic money into the economy. The latter definition usually includes international reserves and domestic credit. By either definition, the monetary base changes as a result ofopen market operations and exchange market intervention.

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The monetary base was carefully examined and each asset was vital to the federal reserves strategy of optimally functioning indefinitely.

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In many countries with a centralized banking system, the government can impact the monetary base by buying and selling of bonds in the open market.

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After the the recent crises and subsequent loss of customers, the bank was rightly worried not only about the present state of its monetary base, but its future prospects as well.

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