Money and banks (part 1)

Money

Everybody knows what money is. People think this is so easy. To make sure you know everything you should read this post. 

In fact money has a long and interesting history and an understanding of how we came to use money is useful for anyone. Soon I’ll give you more info describing how money was “invented” and how it evolved over time. But if you are curious, there are many excellent descriptions on the Internet.

“Money” in economics is actually not as simple to understand as you may think and many use the term money in a way inconsistent with how it is defined in economics. Money is defined as any commodity or token that is generally accepted as payment of goods and services.

·         Ther`re two types of money:

In most countries, one can identify two "types of money”:

•                     Currency and coins

•                     Bank deposits

The total value of all the money in a country at a given point in time is called the money supply and this is an important macroeconomic variable. The reason for the importance of the money supply is that it measures how much is available for immediate consumption. There is an important relationship between the supply of money and inflation, which will be investigated later on.