Money 171025175459 PDF
Money 171025175459 PDF
Money 171025175459 PDF
(Macro-economics)
Money
Definition
• A medium of exchange.
• With the help of money any exchange of goods and
services can take place.
• Money is said to be the most liquid asset among all
the assets of a man.
• It has general acceptability as a means of payment
and liquid characteristic. Keynes called this
Liquidity preference.
Money
Money
• Generally money is created by the Central Bank
or the Government of a country.
• These are legal tender money as there is legal
compulsion for their acceptance.
• They also called as Cash Money.
• Another considerable flow of money is Credit
Money—created by the commercial banks by their
loan transactions
Cash Money Vs Credit Money
Money
• Money is regarded any object which is generally
accepted as:
• medium of exchange
• unit of account i.e. common measure of value
• standard of deferred payment
• store of value
• transfer of value.
Money
Functions Of Money
Money
Primary Functions
• As medium of exchange, money is used as a means
of payment.
• As money has ready purchasing power, it facilitates
in transacting exchange of goods and services with
minimum effort and time.
Primary Functions
• As unit of account, money is treated as common
measure of value.
• value of all goods and services in exchange can be
expressed in terms of money.
• Such expression gives rise to price system in which
money act as a means of calculating the relative
prices as absolute prices of goods and services.
Unit Of Account
Secondary Functions
• As standard of deferred payment, money
can be used in the settlement of debt and future
payments.
• Loans are advanced and future contracts
are settled in terms of money.
Secondary Functions
• As store of value, money is hold as an asset in
liquid (or cash balance) to use anytime in future.
• This is because money has purchasing power
which holds commands over goods and services
all time – at present and in future.
• However use of money as store of value is not
without drawbacks. Changes in general price
level causes rise and fall in the value of money.
When price level rises, value of money falls and
vice versa.
As Store of Value
Secondary Functions
• As transfer of value, sale and purchase of
movable and immovable assets, paper wealth
and physical wealth can be made with the help
of money.
• Thus, value available in the form of asset
can be transferred from one person to
another with the use of money.
As Transfer of Value
Value Of Money
• It means Exchange Value.
• It implies how much of goods and services can
be obtained in-exchange of a unit of money.
• Value of money is inverse of price.
• When price level increases, the value of money
decrease and vice versa.
Exchange Value
Forms of Money
• The total money supply of a country can
broadly be classified into two groups —
• Cash Money and Credit Money.
• It also includes all other financial assets.
• The degree of moniness varies widely from
asset to asset.
Cash Money and Credit Money
The Components of Money Supply
Forms of Money
• In modern monetary transactions, the total
stock of money or money supply includes
the following:
• Metallic money or currency coins
• Standard or Full-bodied Coins.
• Token coins
• Paper Money Or Paper Currency
• Credit Or Bank Money
Paper Money & Currency Coins
Metallic Money Or Currency Coins
• It refers to the coins made out of metal like
gold, bronze, silver, copper, nickel.
• Standard or Full-bodied Coins are those coins
whose face value is equal to its intrinsic
(metallic) value.
• Token coins have intrinsic (metallic) value less
than its face value.
• They generally are of lower denominations are
made of cheap metals like nickel and copper.
• Token coins are used for exchange of small value.
Metallic Money Or Currency Coins
Standard or Full-bodied Coins.
Paper Money Or Paper Currency