Outline of monetary economics

At the very heart of nearly all economic relationships in communities that have attained any considerable degree of economic development lies the institution of money. A large part, indeed some would be inclined to say the major part, of the subject-matter of economics is concerned with the functioning and malfunctioning of money.

This central position in economic relationships arises from the two main characteristics of money. In the first place, the majority of debts in developed communities are settled by means of one or other of the various forms of money. Pur chases of goods, of services, and of claims (such as stocks, shares, and government bonds) are all generally made with the agency of money, as are payments of taxes. As a direct con sequence of this, there arises a point which is still more impor tant for our purposes in the following pages. It is that most incomes are received in the form of money. If a worker or a professional man sells his services for money, then it follows that he is receiving his income in money, because his income consists of the payment he receives for selling his services. In the same way, a businessman who buys and sells goods with money also finds that his income, which derives from the differ ence between the price at which he sells and the price at which he buys, accrues in the form of money.