Marginal Revolution University
Published on 18 Jul 2017That may seem like a really simple question, but it’s actually kind of complicated. Paper bills and coins, or currency, is obviously money. But it doesn’t end there.
Technically, “money” is anything that is a widely accepted means of payment. This has changed throughout history. Once upon a time, cattle could be considered money. Or cowry shells. Today, cryptocurrencies like Bitcoin are being added to the mix.
Given that there’s no set definition for what makes a commodity money, there are a few measurements for the U.S. money supplies. The first, MB (or “monetary base”) measures currency and reserve deposits. This is what the Fed has the most direct control over.
Our next stop will be fractional reserve banking and the money multiplier.
