Money and Banking

Evolution of money
• Commodity money, metallic money, paper
money, bank money
• Barter System
• Bank Money
• Plastic Money
• E-Money
 Barter – Meaning and its inconveniences

• Direct exchange of goods without use of

money is called barter exchange
• Economic exchange without the medium
of money are referred to as barter
exchange
• C.C. Economy
• Commodity for commodity exchange
Inconveniences of Barter exchange
• Lack of double coincidence of wants
• Lack of common measure of value
• Lack of standard of deferred payment
• Difficulty in storing wealth
• Lack of divisibility
₹ Money
Meaning of Money
• Anything which is generally accepted by
the people in exchange of goods and
services or in repayment of debts
• Money is anything that is commonly
accepted as a medium of exchange
Functions of Money
• ‘Money is a matter of functions four
A medium, a measure, a standard, a
store.’
• To facilitate the exchange of goods and
services and help in carrying out trade
smoothly
Functions of money

Functions of money

Secondary
Primary functions
Functions

Standard of
Medium of Store of
Measure of value Deferred
exchange value
payment
 Medium of Exchange
• A medium of exchange is anything that is
readily acceptable as payment.
Functions of Money
• Unit of Account:
- used to measure value in the economy
- reduces transaction costs
• Store of value:
- used to save purchasing power over time.
- other assets also serve this function
- Money is the most liquid of all assets but
loses value during inflation
 Money is a Standard of deferred
Payment

An agreed unit of measure that enables

people to contract for future payments
and receipts
 Money as a Store of Value
• Store of Value
• Use of money to store purchasing power
of later use.
• Saving money to make purchases or pay
bills later or between pay periods.
____________________________

Legal and functional definition of money

Legal defnation
• Legal tender money: money that has legsl
sanction by the government behind it, is
called legal tender : it is money for which