What Does Monetary Base Mean?, Is It Related To Inflation Or Deflation?,

 The Monetary Base (MB) is the total amount of cash and other forms of money held by the public. Inflation refers to the growth of the MB over time. 

Deflation refers to the decline of the MB over time, usually due to a reduction in the supply of money.

 The Monetary Base

 Monetary policy is the government’s control over the quantity of money in circulation. This affects both inflation and deflation. 

For example, when the Federal Reserve raises interest rates, it reduces the availability of credit and causes a rise in the price level. 

On the other hand, when the Fed lowers interest rates, it increases the availability of credit and lowers the price level.