Base money refers to the total amount of money in circulation, including currency in circulation and total bank reserves. It is also known as the monetary base or narrow money. Base money is the foundation of the money supply and is controlled by the central bank through its monetary policy.
High powered money, on the other hand, refers to the total amount of money that can be created by the banking system through the process of money creation. It is also known as the monetary base or reserve money. High powered money includes currency in circulation, bank reserves, and excess reserves held by banks.
In summary, base money is the total amount of money in circulation, while high powered money refers to the total amount of money that can be created by the banking system. Base money is controlled by the central bank, while high powered money is influenced by the behavior of banks and other financial institutions.
Difference between base money and high powered money
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