It makes the world go ‘round -
- but it doesn’t grow on trees.
Some money quotes
“The love of money is the root of all evil.”
1 Timothy 6:10
“The lack of money is the root of all evil.”
“The love of money is the root of all virtue.”
“Money is like muck, not good except to be spread.”
Sir Francis Bacon
“Money is better than poverty, if only for financial reasons.”
“Too many people spend money they haven’t earned, to buy
things they don’t want, to impress people they don’t know”
“Money often costs too much.”
Ralph Waldo Emerson
what is money?
Money is anything people will accept.
What is the difference between money and
Money is the product of markets
It is defined by the function it performs (which we
will see shortly)
“Money is a mental tool used for economic calculation
that ingeniously enables each of us to communicate
what we value in an exchange.”
Currency - on the other hand - is something that has
changed considerably overtime. So... what makes a good
currency? A currency must be...
Not easily copied
Have a face value greater than
its actual value
Such currency is knows as fiat
We accept it
So what, then, is money?
1. Money is a medium of exchange
- that is, it works as a vehicle for the exchange of goods
- this eliminates the need for a “ double coincidence of
2. Money is a store of value
- that is, it is a safe and accessible store of wealth as it
maintains its purchasing power.
3. Money is a measure of value
- that is, it provides buyers and sellers with a unit of
account, or pricing standards. All products may be
valued consistently against a common measure.
How is money measured? (just
how much does Canada have?)
M1 = all Canadian currency in circulation + C$
demand deposits (chequing accounts). - most narrow
definition - just $ in circulation.
M2 = M1 + all money in term deposits (savings
accounts) and money market accounts. - key economic
indicator (along with CPI) used to forecast inflation.
M3 = M2 + money in long term deposits, money-market
funds and foreign currency deposits of residents in
Canada. - broadest measure - used to estimate entire
money supply with an economy.