chapter 3 What Is Money?

Meaning and Function of Money Economist’s Meaning of Money 1. Anything that is generally accepted in payment for goods and services 2. Not the same as wealth or income Functions of Money 1. Medium of exchange 2. Unit of account 3. Store of value Evolution of Payments System 1. Precious metals like gold and silver 2. Paper currency 3. Cheques 4. Electronic means of payment: LVTS, Fedwire, CHIPS, SWIFT, ACH 5. Electronic money: Debit cards, Stored-value cards, Electronic cash and cheques

Bank of Canada’s Monetary Aggregates

Growth Rates of Bank’s Monetary Aggregates

Money as a Weighted Aggregate • The Bank of Canada’s money supply measures are ‘simple-sum’ indices, M = x1 + x2 + … + xn , where xj is one of the n monetary components of the monetary aggregate M • Weighted monetary aggregates (such as the ‘Divisia’) seem to predict inflation and the business cycle somewhat better than the Bank’s aggregates