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What is Money? What is 'money'? How is the supply of money affected by the aims and the actions of the commercial banks, the central bank and the government's financing of the PSBR? Economists usually specify three functions which a thing must fulfil in order to be considered money. Firstly, it is essential that money provide a unit of account. This means that money provides a standard by which the relative values of different goods can be compared. Without this, it would be necessary to know how much a good was worth in terms of every other good before that good could be traded. Having a unit of account allows rational decision making on the part of traders by making the opportunity cost of a given transaction more apparent. Secondly, money must be a medium of exchange. Traders will be willing to accept money in exchange for goods. This eliminates a...

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