Final answer:
The monetary base refers to the total amount of money in an economy that can carry out the transactions motive. It is closely linked to bank accounts and is largely controlled by the banking system. The US central bank, the Federal Reserve, plays a crucial role in setting monetary policy.
Step-by-step explanation:
The monetary base refers to the total amount of money in an economy that can carry out the transactions motive. In most countries, the money supply is either the monetary aggregate M1 or M2. Money in a modern economy is not just paper bills and coins, but is closely linked to bank accounts. The banking system largely conducts macroeconomic policies concerning money and has the power to create money. For example, the US central bank, known as the Federal Reserve, controls the three tools of monetary policy to influence the availability and cost of money and credit to promote national economic goals.