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Monetary Base
(redirected from Base money)

   Also found in: Wikipedia 0.01 sec.
Monetary base
Sum of the currency held by the public and reserves held by financial institutions with the Federal Reserve Banks. This is the monetary aggregate that the Federal Reserve has control over through its monetary policy. Also called High Powered Money because the effect of changes in monetary base on money supply is magnified by the money multiplier.

Narrow Money
A measure of the money supply used by the various central banks that includes only currency in circulation and very near money instruments. In the Federal Reserve System, narrow money includes all physical currency and deposits in checking accounts as well as Negotiable Orders Withdrawal accounts. It does not include savings accounts, certificates of deposit, or money market accounts. This is called narrow money because it applies the most restrictive definition of money. It is also called the money base. See also: M1, M0.


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Rather, the private banks usually create additional credit money (savings deposits, primarily) and the central bank later responds by adjusting base money to maintain a targeted short-term interest rate.
Both countries issue domestic securities to drain some of the base money created by their foreign exchange purchases, and policy changes in July may also affect their practices: China allowed its currency to appreciate slightly against the dollar; Venezuela stopped routing dollar petroleum earnings to: the central bank, sending them to a government development agency instead.
Nonetheless, the growth rate of the monetary base declined in 2004 as the Bank issued bonds that absorbed hall of the base money it created through purchases of foreign exchange.
 
 
 
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