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Money in the modern economy: an introduction

Author

Listed:
  • Michael McLeay

    (Bank of England)

  • Amar Radia

    (Bank of England)

  • Ryland Thomas

    (Bank of England)

Abstract

Money is essential to the workings of a modern economy, but its nature has varied substantially over time. This article provides an introduction to what money is today. Money today is a type of IOU, but one that is special because everyone in the economy trusts that it will be accepted by other people in exchange for goods and services. There are three main types of money: currency, bank deposits and central bank reserves. Each represents an IOU from one sector of the economy to another. Most money in the modern economy is in the form of bank deposits, which are created by commercial banks themselves.

Suggested Citation

  • Michael McLeay & Amar Radia & Ryland Thomas, 2014. "Money in the modern economy: an introduction," Bank of England Quarterly Bulletin, Bank of England, vol. 54(1), pages 4-13.
    • Handle: RePEc:boe:qbullt:0127
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    References listed on IDEAS

    as
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