MakingAre Bitcoins Money?theConnectionWhen we think of money, we typically thinkof currency issued by a government.. But currency is only a small part of theVRESINmoney supplyNUMERISOver the last decade or so, consumers havecome to trust forms of e-money such asSBTEPayPal.Bitcoins are a new form of e-money, owned not by a government orfirm,but a product of a decentralized system of linked computers..Bitcoinscanbetradedforother currenciesonweb sites.Some web sites accept Bitcoins as a form of payment.Should Bitcoins be included in a measure of the money supply?. For now, they are not; if they grow popular, maybe they should be.162015PearsonEducation,Inc
© 2015 Pearson Education, Inc. 16 Making the Connection Are Bitcoins Money? When we think of money, we typically think of currency issued by a government. • But currency is only a small part of the money supply. Over the last decade or so, consumers have come to trust forms of e-money such as PayPal. Bitcoins are a new form of e-money, owned not by a government or firm, but a product of a decentralized system of linked computers. • Bitcoins can be traded for other currencies on web sites. • Some web sites accept Bitcoins as a form of payment. Should Bitcoins be included in a measure of the money supply? • For now, they are not; if they grow popular, maybe they should be
How Do Banks Create Money?14.3LEARNINGOBJECTIVEExplainhowbankscreatemoney2015PearsonEducation,Inc17
LEARNING OBJECTIVE © 2015 Pearson Education, Inc. 17 How Do Banks Create Money? 14.3 Explain how banks create money
BanksandMoneyBanks play a critical role in the money supply: Recall that there is more money held in checking accounts thanthere is actual currency in the economy.So somehow money is being created by banks.Further, banks are generally profit-making private firms: some small,but some among the largest corporations in the country.: Their activities are designed to allow themselves to make a profit.In order to understand the role that banks play, we will first try tounderstandhowbanksoperateasabusiness.@2015PearsonEducation,Inc.18
© 2015 Pearson Education, Inc. 18 Banks and Money Banks play a critical role in the money supply. • Recall that there is more money held in checking accounts than there is actual currency in the economy. • So somehow money is being created by banks. Further, banks are generally profit-making private firms: some small, but some among the largest corporations in the country. • Their activities are designed to allow themselves to make a profit. In order to understand the role that banks play, we will first try to understand how banks operate as a business