Question

Distinguish among money, income, and wealth. Which one of the three does the central bank of a country control?

Answer 1

Money is the oil that lubricates the economy and helps people, firms and governments conclude transactions with each other. This consists of currency, deposits in banks, near-cash investments like treasury bills, etc. Central banks control this quantity, by changing rates of interest, printing currency, buying / selling securities in exchange of money, or by changing the reserve requirements. It is a stock measure (meaning that we measure it at a point in time).

Income is the monetary value of production done in a period (for instance, National Income is the monetary equivalent of the goods, services, etc., produced by the residents fo a country in a year). It is a flow measure, meaning that it is measured for a period of time. Central banks don't control it directly, but may influence it by changing the money supply.

Wealth is also a stock measure and refers to the stock of 'valuables' an entity has. For instance, individual wealth refers to the amount of money, marketable securities, immovable assets, etc. they have. Central banks don't control it directly.