Chapter 14
The Color—and Velocity—of Money
In This Chapter
• Definitions of money
• How money fuels the economy
• Interest rates and credit
It’s been said that the most confusing thing in the world to an economist is a $10 bill lying on the sidewalk. He doesn’t know whether to pick it up, leave it to be found by someone with a higher propensity to spend, or convert it into pesos.
Indeed the topic of money is far more complex to an economist than it is to a business person, consumer, or taxpayer. That’s good, because in a modern economy, money takes many forms and behaves in ways that profoundly affect growth, employment, and prices. The better an economist understands the forms that money takes and the ways in which it behaves, the better ...

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