I spotted this infographic from the Bank of England BoE) on Twitter and thought it was an excellent piece to share. The chart explains the basic concept of money and its features and functions in today’s economy.
Here it is:
Basically, there are three types of money: currency, bank deposits and central bank reserves. Each represents an ‘IOU’ from one sector of the economy to another.
If you want to read more on the the concept of money, and how money is created by banks, here is the link for two must-read explanatory articles (pre-releases) by the bank. They are part of the Quarterly Bulletin issued by the bank.
Nice work, BoE!