2. Economics: Introduction to monetary policy
Monetary policy may be defined as
actions taken by a country’s Central
or Reserve Bank to influence the
price and availability of credit in
the economy.
It is carried out to achieve
sustainable growth while keeping
3. Money is regarded as :
A medium of exchange
A store of value
A measure of value
Capable of extinguishing debt
4. The Evolution of the Monetary System
1. Commodity Money
Commodity Money takes the form of or is backed by a
commodity that has intrinsic value. Examples include
gold/silver coins, paper currency backed by gold, or
even cigarettes in prisons.
2. Fiat Money
Fiat money has no intrinsic value and is made viable
solely by government decree. It is not backed by any
commodity and only the collective belief in the
government’s stability keeps the monetary system in
operation.
5. Evolution continues:
3. Checks
Checks are used to conduct payments within the
banking system. Often payments cancel each other
out, reducing the need for physical transfer of money
across locations
4. Electronic Payments
Since the checks themselves still need to be physically
sent and received, e-payments developed as a means to
instantly instruct banks to make payments.
