You should now understand what money is and how central banks affect its supply. Yet this accomplishment, valuable as it is, is only the first step toward understanding monetary policy. The next and more interesting step is to see how changes in the money supply influence the economy. We begin our study of that question in the next chapter. As we examine the effects of monetary policy, we move toward an appreciation of what central bankers can do to improve the functioning of the economy and, just as important, an appreciation of what they cannot do. But be forewarned: you will have to wait until the end of the book to see all the pieces of the puzzle fall into place.

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