monetary base

The monetary base, also known as high-powered money, refers to the total amount of a country's physical currency and the reserves held by its central bank. It includes all the cash in circulation among the public and the deposits that commercial banks keep at the central bank. The monetary base is crucial because it serves as the foundation for a country's money supply, influencing how much money banks can create through lending. Changes in the monetary base can affect interest rates, inflation, and overall economic activity.