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What Is Money?
What is money?
It is a unit of account - like kilogram (a measure of mass). Being a unit of measurement, money does not have meaning other than by explicit reference to something else.
What does money measure?
It measures debt in terms of a common unit - something called currency (DM, Europ, Dollar etc.).
It measures debt in terms of a common unit - something called currency (DM, Europ, Dollar etc.).
What is debt?
A record of an obligation.
What kind of obligation?
The obligation to provide the person one is obligated to with a means of payment - exchangeable into a vast number of exchangeable goods and services.
Money as a unit of account allows us to record the activities of
households,
firms, and
ultimately the entire economy
in a system of double book-entry.
In that way, we are able to measure uniformly, map, and compare the relationships of obligations among the participants of the economy.
households,
firms, and
ultimately the entire economy
in a system of double book-entry.
In that way, we are able to measure uniformly, map, and compare the relationships of obligations among the participants of the economy.
This helps in many different ways: we can assess the wealth and creditworthiness of economics subjects. We can establish uniform rules by which they are obliged to contribute to the public purpose by paying taxes. We can help coordinate economic agents and provide them with a safer environment for business, such as is the case when the central bank monitors and facilitates bank activities by keeping double book-entry records of their transactions.
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