A man may deposit some gold (or silver) in a bank and receive a certificate that he has done so, which also constitutes a promise by the bank to repay him his gold on demand. He may then use this certificate as money. He may give it to someone to whom he has to discharge a debt. ‘ Look, here is this promise by the famous bank X to pay me in gold; if I give it to you, it will pay you the gold.’ We may call these certificates bank-notes. They may be a convenient substitute for gold, both for carrying about, especially in large denominations, and for sending through the post.
KeywordsMonetary Policy Central Bank Commercial Bank Money Supply Treasury Bill
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