ABSTRACT
This chapter discusses the supply and demand for money, and Chinese monetary policy. In the process, people tend to understand what money is conceptually and institutionally. The portion of the money supply that includes currency in circulation, currency held in vaults by banks, and currency on reserve by banks at the central bank is the monetary base or high-powered money. The chapter focuses on the institutional framework for monetary policy in both the United States and China. These two large economies make for some interesting comparisons and contrasts both historically and contemporaneously in terms of monetary economics. People care about money not only because of its relationship to institutions and its role as a key asset, but also because the amount of money in an economy has profound effects on inflation, interest rates, short-term economic growth, and employment.
