Money surrounds us, we use it daily, and it affects our lives in both seen and unseen ways. However, it is certainly the least understood aspect of the economy. In this chapter, we discuss money—what it is, why we want it, and how it influences the macroeconomy. We introduce the money market, which affects the interest rate and in turn the investment that we discussed in previous chapters. We conclude by talking about the role of a central bank in an economy.
After completing this chapter, the student should be able to:
1. Describe the functions and types of money.
2. Calculate the money multiplier and describe how banks create money.
3. Describe and model the money market, including how ...