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High-powered money

High-powered money Definition

High-powered money is a macroeconomic term referring to the monetary base, which is controlled by the institution in a country that controls monetary policy. This is usually either the finance ministry or the central bank.

The monetary base is called high-powered because the magnitude of changes in monetary base are greatly magnified by the money multiplier.

As an example, a 1% increase in monetary base may lead to a 10% increase in the money supply due to money multipler effects.




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