CHAP 2:

MONEY AND
PAYMENTS
SYSTEM
CENTRAL BANK AND MONETARY POLICIES
NGUYEN THI MINH ANH
LEARNING OBJECTIVES

• Define money and describe

its functions.
• Discuss the different
methods of payment and the
future of money.
• Explain how the money
supply is measured and how
it is linked to economic
growth and inflation..

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 Contents
Money and How We Use It

The Payments System

The Future of Money

Measuring Money

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WHAT IS MONEY?
• Anything that can readily be
used to make economic
transactions
• Money is an asset that is
generally accepted as
payment for goods and
services
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an item that
buyers give to
sellers when
they purchase

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THE PAYMENTS
SYSTEM ?
• The web (NOT WEBSITE) of
arrangements that allow for
the exchange of goods and
services
• Money is at the heart of the
payments system
 COMMODITY MONEY

• money that takes the

form of a commodity with
intrinsic value

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FIAT MONEY

• money without intrinsic

value that is used as
money because of
government decree

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CHECKS
• A check is just an
instruction to the bank
to take funds from your
account and transfer
them to the person or
firm whose name you
have written on the
“Pay to the order of ”
line
 NOT final payment
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ELECTRONIC PAYMENTS
• A order of “line”
 NOT final payment

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WHAT IS THE DIFFERENCE BETWEEN DEBIT CARDS
AND CREDIT CARDS?

DEBIT CARD
• provides the bank with
instructions to transfer funds
from the cardholder’s account
directly to a merchant’s account
• your account balance has
• to be higher than the payment
you want to make
• fee based on the size of the
transaction
• deferred payment
• bank to lend the cardholder
money  make the
payment for you, and you
repay the debt later
• a late fee at a very high
interest rate
CREDIT CARD
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ELECTRONIC TRANFERS
• movements of funds
directly from one
account to another
• automated
clearinghouse
transaction (ACH):
• Your bank account is
debited or credited
automatically
• recurring payments
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STORED-VALUE CARD

SUBWAY / BUS PHONE CARD GIFT CARD

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E-MONEY
• instead of a credit or
debit
• not issued or
guaranteed by the
government

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THE FUTURE OF
MONEY
BITCOIN AND THE BLOCK CHAIN
(P.34)
MEASURING
MONEY
• Changes in the amount of money in the economy are
related to changes in interest rates, economic growth,
and, most important, inflation
• Money = means of payment
Inflation = prices are increasing over
need more units of money to buy the same good
 INFLATION MAKES MONEY LESS VALUABLE

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Money = means of
payment Monetary
 quantity of aggregates
money = quantity
of currency

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 • The narrowest definition of money
• = only currency and various deposit accounts
• the most liquid assets in the financial system

• = all of M1 + assets that difficult to turn into

currency quickly
• savings deposits, mutual fund shares…

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THANK YOU!
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