There are a few concepts that need to be covered:

• Wealth
• Money
• Monetary Policy
• Banks

Wealth is the actual value owned by individuals. For a given individual wealth is relative. Perhaps you like shoes, and I like jackets, so I trade my shoes for your jacket. By trading these items, we have each become wealthier; however the wealth of the society has remained the same.

The wealth of the society can be measured as the average value held for each good or service multiplied by the quantity of those trade-ables. From this it is obvious that the only way to increase the wealth of the society at large is to offer a service or make a new good.

Trades become complicated if we're only bartering. Suppose I have shoes and I need a jacket, but the jacket maker doesn't need shoes she needs a sewing needle, but the ...