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CHAPTER II THE CONSTITUENTS OF MONEY The inquiry now arises, what
things constitute money ? The thought called up in most minds by
the word " money" is simply that of coined metal ?gold or silver.
But, whether the function of medium of exchange or that of standard
of value be regarded, the term " money " has a much wider
signification. It includes anything which serves the purpose of
such a medium, all instruments of credit which are used as
substitutes for coin. It may be objected that a cheque, for
example, is not money, but only evidence of a right to demand
money, and, in a legal sense, that is quite true. But we are now
considering its economic function, the purpose which it actually
serves, and, unquestionably, a cheque does perform the work of
money as a medium of exchange. The importance of including in the
category of money all kinds of credit instruments which do duty for
money is obvious, when we recall to mind the relation between the
quantity of money in use and its effect upon prices described in
the preceding chapter. An increase or decrease in the number and
amount of these instruments in use is the same thing, in this
respect, as an increase or decrease in the amount of metallic money
in use. Obviously, therefore, when considering variations in the
standard of value, we must take into account not only changes in
the quantity of metallic money, but also changes in the volume of
credit instruments. Before dealing with this point, however, it
will be of advantage to state, categorically, the several
constituents of the whole mass of money used in this country. These
are: ? 1. Gold, silver, and bronze coins. 2. Bank-notes, secured by
an equivalent amount of gold coin or bullion. 3. Bank-notes not so
secured. 4. Cheques, bills of exchange, and other c...
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