Ch14

What is the monetary base? What is the difference between the monetary base and money supply?

Monetary base is the sum of bank reserves and the currency in circulation. Money supply is determined by multiplying the monetary base by the money multiplier, which results in the money supply.

What are open market operations? What is the effect on the monetary base of an open market purchase?

Open market operations are the Fed's purchases and sales of securities usually U.S. Treasury securities, in financial markets An open market purchase results in a monetary base increase by the dollar amount of the purchase.

What does the phrase "multiple deposit creation" mean?

Part of the money supply process in which an increase in bank reserves results in rounds of bank loans and creation of checkable deposits and an increase in the money supply that is a multiple of the initial increase in reserves.