The Monetary Base Is Defined as

question 4

Multiple Choice

The monetary base is defined as

• A) total demand deposits.
• B) total demand deposits minus free reserves.
• C) bank reserves plus currency outside member banks.
• D) the interest rate on federal funds.
• E) M1.

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Definitions:

Bank Leverage

The ratio of a bank's total debt to its equity capital, indicating the extent to which bank funding is used to finance its assets.

Bank Insolvency

A condition where a financial institution's liabilities exceed its assets, rendering it incapable of meeting its obligations.

Required Reserve Ratio

The fraction of deposits that banks are required to keep on hand as reserves, either in their vaults or on deposit at a central bank.

Money Supply

The aggregate of all financial assets available within an economy, encompassing various forms of money like bank notes, coins, and balance in bank accounts.