In the modern economy, what predominantly constitutes money?

In the modern economy, money is predominantly represented by various forms, with bank loan credits playing a significant role. When banks issue loans, they do so by creating deposits in the borrower’s account, effectively increasing the money supply. This process is known as fractional reserve banking, where banks keep a fraction of deposits as reserves and lend out the remainder. The created deposits used in transactions are a significant portion of what people consider money today since they are used to pay for goods and services, just like physical currency.

Other forms like Federal Reserve notes are indeed physical representations of money but do not encompass the entire spectrum of what constitutes money in the economy. Gold and silver coins reflect a more historical definition of money that has largely been replaced by fiat money and banking practices. Lastly, while cryptocurrencies are becoming more popular and recognized in certain markets, they do not yet constitute the predominant form of money in the economy relative to traditional banking credits.

Therefore, the role of bank loan credits is foundational to understanding how money functions in modern economies, making this choice the most accurate representation of what constitutes money today.