Terms and concepts

Fiat money: Money that is given value because those who use it believe it has value; the value is not derived from any inherent characteristic.

M0: The amount of coin and banknotes in circulation.

MB: The portion of the commercial banks’ reserves that is maintained in accounts with their central bank plus the total currency circulating in the public.

M1: The amount of cash in circulation plus the amount in bank checking accounts.

M2: The amount of cash in circulation plus bank accounts, savings accounts and small deposits.

A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans it evolved in the fourteenth century in the prosperous cities of Renaissance Italy 

the history of banking, a number of banking dynasties — notably, the Medicis, the Fuggers, the Welsers, the Berenbergs, and the Rothschilds — have played a central role over many centuries

The economic functions of banks include:

• 
  Issue of money, in the form of banknotes and current accounts subject to cheque or payment at the customer's order
  
•