MONEY

Money

Money

A country's central bank is the provider of the most liquid of financial assets (the ones that can be converted into money most easily, at no cost), namely, cash (coin and notes in circulation) and the assets that banks use to meet their liabilities to the central bank and conduct transactions with one another (the socalled bank reserves, which tend to be mainly deposits held at the central bank). When the monetary authority creates those liquid assets and makes them available to banks, it is in effect encouraging them to extend more credit and thus is stimulating the growth of demand ...