Money in the modern economy glossary

Bank Deposits

A type of IOU from a commercial bank to a person or a company.

Base money

Central bank reserves + currency = in circulation.

Broad Money

Currency held by the private sector (other than banks) and bank deposits (and other similar short term liabilities of commercial banks to the rest of the private sector).

Central Bank Reserves

Type of IOU from the central bank to a commercial bank.

Commodity money

A commodity with intrinsic value of its own that can be used as a medium of exchange, fulfilling the main functions of money.

Currency

A type of IOU (in bank note or coin form), largely from the central bank to the holder of the note.

Fiat money

Money that is irredeemable - it is only a claim on further fiat money. It has no intrinsic value and is not backed by physical commodities.