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Money

The document discusses the barter system as an ancient method of exchange before the invention of money, highlighting its limitations. It defines money, its characteristics, functions, and various forms including currency, deposit money, and electronic money. The importance of money in production, consumption, and economic development is also emphasized.

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kaluyani.022.2009
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19 views

Money

The document discusses the barter system as an ancient method of exchange before the invention of money, highlighting its limitations. It defines money, its characteristics, functions, and various forms including currency, deposit money, and electronic money. The importance of money in production, consumption, and economic development is also emphasized.

Uploaded by

kaluyani.022.2009
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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BARTER SYSTEM

A barter system is an old method of exchange.


Th is system has been used for centuries and
long before money was invented. People
exchanged services and goods for other services
and goods in return.
Animal money

•Cow was accepted as a form of moneymoney

•Cow and sheep was collected as fine and tax in

Roman state.
• Money
• Money is derived from the word Juno ”Uni”
• Means one, unit or unique
• In Latin Monte-remind
• Greek Moneres “unique”
• Definition
• “Anything which is generally acceptable as a
means of exchange and act as a measure and
store of value is money”
• Characteristics
• 1.General acceptability
• Accepted by all is a medium of exchange
• People wont hesitate to accept
• 2.Measure of value
• Any goods can easily measured in terms of
money
• 3.Active Agent
• It is required for commercial purpose
• Process production cannot start without money
• 4.Liquid Assets
• It can be easily converted in to goods and
services
• Debt and stock has less liquidity compared to
money
• Money can be converted directly
• 5.Money is a means not an end
• Money itself cannot satisfy wants
• It’s a medium
• 6.Voluntary acceptability
• Always people wish to hold money and generally
acceptable
• 7.Government control
• RBI has authority to issue currency
• RBI keeps control over money supply in a
• FUNCTIONS OF MONEY

FUNCTIONS OF MONEY

PRIMARY SECONDAR CONTINGE


FUNCTIO Y
1.STAND NT
1.MAXIMIS
N FUNCTION
ARD OF FUNCTION
ATION OF
1.MEDIU DEFFER UTILITY
2.EMPLOY
M OF ED MNET OF
EXCHAN PAYMEN FACTOR
GE T INPUTS
2.MEASU 2.TRANS 3.CREDIT
SYSTEM
RE OF FER AND 4.DISTRIBU
VALUE STORE TION OF
OF NATIONAL
VALUE INCOME
• 1.Primary function
• 1.Medium of exchange
• It serves as medium of exchange
• It carries capacity to purchase goods
and services
• Accepted as medium in sales
and purchase
• It eliminates the difficulty in
barter system
• It avoids waste of time and
resources
• 2.Measure of Value
• In barter system commodity is used to express in
terms of commodity
• rice is expressed in terms of cloth or others
• Now commodity is expressed terms of money
• Its called as price
• It has own value or purchasing power
• Rupees in India and Dollar in USA
• II Secondary function
• 1.Standard of deferred payment
• It is used in settlement of debts
• Payment can be made in future and it can be
assessed
• In barter system credit transaction were not
possible
• Money has general acceptability
• It can be expressed in definite and standardized
unit
• Money has successful functional unit
• (i)Value is more stable
• (ii)durability is higher
• (iii)quality of general acceptability
• Eg: A lends rs.1000 for B a year it is definite but A
lends B rice its not definite he will same quality.
2.Transfer of value
• It can be transferred from one person to another
• Its quick and efficient
• Price of a commodity can be transferred in terms
of money
• Its possible from country to
country
• 3.Store of value
• It can be stored in the form of wealth
• It can be stored in the forms of gold, bond etc
• But money is perfectly liquid asset
• It gives immediate purchasing power
• III Contingent function
• 1.Maximisation of utility
• Customer can maximize the satisfaction by
buying goods and services.
• All the price expressed in terms of money
• 2.Employment of factor inputs
• Money helps deciding the units of production
• Every producer aims at profit
• To maximize profit decision regarding
employment of factors is important and its
expressed in terms of money
• 3.Credit system
• Many commercial activities takes or runs for
credit
• Money provides base for credit
• Cheque and bill of exchange cannot be used
without the existence of money
• 4.Distribution of national Income
• Without the use of money the distribution of
national income is impossible
• Modern Forms of money
• Currency
• It’s a unit of exchange issued by the government.
• It is the basis for trade
• It includes metallic money and Paper money
• (a) Metallic Money
• It is the coins used for small transactions
• Its issued by the government
• Denominations are 50P,1,2,5,and 10 rupee coins
• Paper money
• Its used for large transactions
• The currency note duly signed by the governor of India
• It can be converted into coins
• Currency notes are 1,2,5,10,20,50,100,500,and 2000
• Deposit money or Bank Money
• It refers money deposited by the people in bank
• Its for safety, money transferring and to earn interest
• It can be withdrawn by cheque
• Cheque is very convenient method for transferring and
withdrawing amount.
• Legal Tender money
• It got legal sanction and approval by government
• It cannot be reused in settlement of payments
• Both coins and currency are legal tender
• Cheques can be rejected because there is no guarantee
and it may get dishonored
• Coins and currency notes are legal tender
• Cheques and cards not legal tender
• Near Money
• Its not cash but highly liquid assets
• Can easily be converted into cash
• Eg:Bank deposit and treasury bills
• It does not function as a medium of exchange in evry
day purchase.
• Electronic Money
• Its also known as e-money, digital money ,e-cash etc
• Eg:Electronic fund transfer
• It helps in transferring money from one place to another
account
• It avoids physical transfer of money and use of cheque
and reduce the need for currency.
• Fiat Money
• It is ay money value is determined by legal means
• It is a government order that should accept as a means
of payment
• Its usefulness not from the intrinsic value
IMPORTANCE OF MONEY
Money and
Money and Consumptio Money and
Production n Distribution

Removal of Money and Money and


difficulty in Capital Public
Barter Formation Finance
system
Money and Money and
External Economic
Trade Developmen
t
Part –A(2 Marks)
1.What is Barter system?
2.Write the advantages of Barter system
3.Write the difference between currency and
money.
4.What is Fiat Money?
5.What is Legal Tender ?
Part-B(5 Marks)
1.Explain the functions of money.
2.Explain the characteristics of money.

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