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The larger monetary aggregates (m1 and m2) and consequently aggregate demand won't expand significantly in response if banks are slow to lend, even though. The federal reserve may raise monetary base.
Although the monetary base is a less frequently observed and distinct from the money supply, it is nonetheless a highly significant monetary aggregate. It includes the entire amount of money in use as well as the part of commercial bank reserves that is kept on hand at the central bank. Because it may be amplified through the use of fractional reserve banking, this is frequently referred to as high-powered money. The amount of money in circulation as well as the share of commercial bank reserves that is kept in the central bank's vault make up the monetary base as an aggregate.
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