Editing Economics (section)

=== Money and monetary policy ===
{{Main|Monetary policy}}
{{See also|Monetary economics|History of money}}

[[Money]] is a ''means of final payment'' for goods in most [[price system]] economies, and is the [[unit of account]] in which prices are typically stated. Money has general acceptability, relative consistency in value, divisibility, durability, portability, elasticity in supply, and longevity with mass public confidence. It includes currency held by the nonbank public and checkable deposits. It has been described as a [[social convention]], like language, useful to one largely because it is useful to others. In the words of [[Francis Amasa Walker]], a well-known 19th-century economist, "Money is what money does" ("Money is ''that'' money does" in the original).<ref name="Walker1891">{{cite book|author=Francis Amasa Walker|author-link=Francis Amasa Walker|title=Money|url=https://books.google.com/books?id=2MJYSvaRqcwC|access-date=5 November 2017|year=1878|publisher=Henry Holt and Company|location=New York|page=405}}</ref>

As a [[medium of exchange]], money facilitates trade. It is essentially a measure of value and more importantly, a store of value being a basis for credit creation. Its economic function can be contrasted with [[barter]] (non-monetary exchange). Given a diverse array of produced goods and specialised producers, barter may entail a hard-to-locate double [[coincidence of wants]] as to what is exchanged, say apples and a book. Money can reduce the [[transaction cost]] of exchange because of its ready acceptability. Then it is less costly for the seller to accept money in exchange, rather than what the buyer produces.<ref>{{cite encyclopedia |author-link=James Tobin |last=Tobin |first=James |date=1992 |chapter=Money (Money as a Social Institution and Public Good) |title=The New Palgrave Dictionary of Money and Finance |volume=2 |editor-first1=Peter K. |editor-last1=Newman |editor-first2=Murray |editor-last2=Milgate |editor-first3=John |editor-last3=Eatwell |pages=770–771 |publisher=Macmillan |isbn=978-1-5615-9041-4 |url=https://books.google.com/books?id=b0UOAQAAMAAJ&pg=PP1}}</ref>

Monetary policy is the policy that central banks conduct to accomplish their broader objectives. Most central banks in developed countries follow [[inflation targeting]],<ref>{{cite web |url=http://www.imf.org/external/pubs/ft/fandd/basics/target.htm |title=Inflation Targeting: Holding the Line |last=Jahan |first=Sarwat |publisher=International Monetary Funds, Finance & Development |access-date=13 September 2023}}</ref> whereas the main objective for many central banks in development countries is to uphold a [[fixed exchange rate system]].<ref name=IMF>{{cite book |last1=Department |first1=International Monetary Fund Monetary and Capital Markets |title=Annual Report on Exchange Arrangements and Exchange Restrictions 2022 |date=26 July 2023 |publisher=International Monetary Fund |isbn=979-8-4002-3526-9 |url=https://www.elibrary.imf.org/display/book/9798400235269/9798400235269.xml?code=imf.org |access-date=13 September 2023 |language=en }}</ref> The primary monetary tool is normally the adjustment of interest rates,<ref name=RBA>{{cite web |last1=Baker |first1=Nick |last2=Rafter |first2=Sally |title=An International Perspective on Monetary Policy Implementation Systems {{!}} Bulletin – June 2022 |url=https://www.rba.gov.au/publications/bulletin/2022/jun/an-international-perspective-on-monetary-policy-implementation-systems.html |publisher=Reserve Bank of Australia |access-date=13 September 2023 |language=en-AU |date=16 June 2022}}</ref> either directly via administratively changing the central bank's own interest rates or indirectly via [[open market operation]]s.<ref>{{cite book |title=MC Compendium Monetary policy frameworks and central bank market operations |date=October 2019 |publisher=Bank for International Settlements |isbn=978-92-9259-298-1 |url=https://www.bis.org/publ/mc_compendium.pdf}}</ref> Via the [[monetary transmission mechanism]], interest rate changes affect [[investment]], [[Consumption (economics)|consumption]] and [[net export]], and hence [[aggregate demand]], [[Output (economics)|output]] and employment, and ultimately the development of wages and inflation.