Base money includes physical currency in circulation (banknotes and coins) plus the reserves that commercial banks hold at the central bank.

The central bank can influence the amount of base money by open market operations, such as buying or selling government bonds, which injects or withdraws reserves from the banking system.

Since base money is a liability of the central bank, it does not appear at all on commercial banks’ balance sheets.

Base money appears on the asset side of the central bank’s balance sheet, reflecting the bank’s ownership of currency and reserves.

Base money is a liability of commercial banks, representing currency they owe to depositors.