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    Money Supply

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    Trifan_Dumitru
    This document defines money and discusses its history, functions, and how the money supply is controlled. It notes that money originated as a barter system and commodity currencies like gold and silver before the development of paper money. It defines money narrowly as highly liquid forms used in exchange and broadly as less liquid stores of value. The functions of money are described as a medium of exchange, unit of account, store of value, standard for deferred payment, and measure of value. The document explains that central banks control monetary policy and the money supply through tools like interest rates, reserve requirements, and open market operations, while governments also influence the money supply through spending and taxation.

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    Money Supply

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    Trifan_Dumitru
    4 views12 pages
    This document defines money and discusses its history, functions, and how the money supply is controlled. It notes that money originated as a barter system and commodity currencies like gold and silver before the development of paper money. It defines money narrowly as highly liquid forms used in exchange and broadly as less liquid stores of value. The functions of money are described as a medium of exchange, unit of account, store of value, standard for deferred payment, and measure of value. The document explains that central banks control monetary policy and the money supply through tools like interest rates, reserve requirements, and open market operations, while governments also influence the money supply through spending and taxation.

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    Money Supply

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    This document defines money and discusses its history, functions, and how the money supply is controlled. It notes that money originated as a barter system and commodity currencies like gold and silver before the development of paper money. It defines money narrowly as highly liquid forms used in exchange and broadly as less liquid stores of value. The functions of money are described as a medium of exchange, unit of account, store of value, standard for deferred payment, and measure of value. The document explains that central banks control monetary policy and the money supply through tools like interest rates, reserve requirements, and open market operations, while governments also influence the money supply through spending and taxation.

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    © All Rights Reserved
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    4 views12 pages

    Money Supply

    Uploaded by

    Trifan_Dumitru
    This document defines money and discusses its history, functions, and how the money supply is controlled. It notes that money originated as a barter system and commodity currencies like gold and silver before the development of paper money. It defines money narrowly as highly liquid forms used in exchange and broadly as less liquid stores of value. The functions of money are described as a medium of exchange, unit of account, store of value, standard for deferred payment, and measure of value. The document explains that central banks control monetary policy and the money supply through tools like interest rates, reserve requirements, and open market operations, while governments also influence the money supply through spending and taxation.

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    of 12

    MONEY, MONEY SUPPLY

    Banking and
    Finance
    BRIEF HISTORY OF MONEY
     Usage of term dates back to 3000 BC in Mesopotamia
     Barter system – barley, cattle, services etc
     Commodity money – gold and silver
     Paper money – Originally receipt for commodity
     Paper money first used in China during Song Dynasty
    (960- 1279)
     After world war 2. most governments adopted fiat
    currencies
     Today many countries have their own currencies
    DEFINING MONEY
    Anything that is accepted as regal tender

    Money can be defined narrowly and


    broadly
     Narrow money: Highly
    liquid forms of money
    (money as means of
    exchange)

     Broad money: Less


    liquid forms of money
    (money as a store of value)
    FUNCTIONS OF MONEY
    Medium of exchange
    Unit of account
    Store of value
    Standard of deferred payment
    Measure of Value
    MONEY SUPPLY
    MONEY SUPPLY
    The amount of money in circulation

     The central bank is the custodian


    of monetary policy in every country
    and control the money in
    circulation

     Less money in circulation can


    hinter efficient business operation

     Too much money into circulation


    can lead to inflation, which is a
    general rise in prices of goods and
    services
    MONETARY TOOLS ON MONEY SUPPLY
     Interest rates
    - Affects the cost of borrowing
     Reserve requirement
    - Affect the money multiplier
     Open market operation - OMO
    - Affect the quantity of reserves and the monetary base
    FISCAL TOOLS
    Government Expenditure
    -Influence aggregate demand in the economy
    Tax
    -Influence disposable income of consumers
    CONCLUSION
    Money has a long history
    Money has many functions
    Money makes life more easier
    Central banks are very important for
    currency stability
    Government influence the economic
    performance
    “Money is like a sixth sense and you can't make use of
    the other five without it.” (William Somerset
    Maugham)
    REFERENCES
     http://www.usc.es/~economet/aeid.htm
     http://www.tandf.co.uk/journals/titles/00036846.asp
     http://www.blackwellpublishing.com/journal.asp?ref=0013-0117
     http://www.tandf.co.uk/journals/titles/09535314.asp
     http://lawecon.lp.findlaw.com/
     http://www.findlaw.com/10fedgov/index.html
     http://money.cnn.com/
     http://www.smartmoney.com/
    Thank you for your
    attention

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