10.0 Introduction
Learning Objectives
At the end of this chapter, learners will be able to:
- Explain what money is and why we need it.
- Describe how money is measured in Canada today.
- Outline how banks create money.
- Identify the roles of the Bank of Canada and its open market operations.
- Explain the Equation of Exchange.
It’s a bit ironic that after all you have studied in this course about buying, selling, producing, and consuming, it’s only now that we introduce money and the financial side of the economy. In an important sense, this module is similar to the previous one on budgets and fiscal policy. In this module, like the last one, we start with practical stuff:
- What is money?
- What are banks?
- How does credit work?
- What is the difference between a credit card and a debit card?
Understanding how these things work will provide a solid foundation for understanding how the government intervenes in the macroeconomy through monetary policy and bank regulations, which we’ll investigate in another chapter. You use money nearly daily, but in this section, you will take a deeper look at what money is—what it represents, why it has value, and what purpose it serves.
Attribution
“Why It Matters: Money and Banking” from Macroeconomics by Lumen Learning is licensed under a Creative Commons Attribution 4.0 International License.
