Nature and Function of Money

Content $ 10 $ 10 $ 10 $ 10 10 $ 10 1.Barter System 2. Functions of Money $ 10 10 3. Properties of Money $ 10 4. Types of Money

Content 1.Barter System 2. Functions of Money 3. Properties of Money 4. Types of Money

Barter System In ancient times before money was invented, people exchanged goods directly for other goods. This way of carrying out exchange is called barter.

Inconveniences of Barter Difficulty in meeting double coincidence of wants

Inconveniences of Barter Higher cost of agreeing on an exchange ratio.

Inconveniences of Barter Lack of common measure of value Inconvenience of storing wealth

When Money Is Used... A person can sell his goods for money and then keep the money for future use. The act of selling is separated from the act of buying

Content 1.Barter System 2. Functions of Money 3. Properties of Money $$$ 2. Functions of Money 3. Properties of Money 4. Types of Money

Functions of Money As a generally acceptable medium of exchange As a store of value As a standard of deferred payment As a unit of account

So, what is MONEY ? MONEY Money can be any asset that is generally acceptable as a medium of exchange for settling payments or debts.

Content 1.Barter System 2. Functions of Money 3. Properties of Money 4. Types of Money

Properties of Money Generally acceptable Limited in supply Durable Portable Divisible Homogeneous

Content 1.Barter System 2. Functions of Money 3. Properties of Money $ 5 4. Types of Money

Types of Money C C Commodity money has intrinsic value e.g. cattle,silk, gold and silver Convertible paper money e.g. gold and silver certificates

Types of Money Inconvertible paper money also called ‘Fiat Money’ simply declared by the government as money legal tender e.g. notes and coins

Types of Money Deposit money Demand deposit current account banks do not give any interest not legal tender e.g. cheque

Types of Money Saving deposit interest is paid hold passbook to withdraw funds not allow to withdraw more than balance in one’s account e.g. EPS

Types of Money Time (or fixed) deposits place one’s money with the bank for a period of time  Maturity period interest rates are higher than those on savings deposits Negotiable Certificates of Deposits (NCDs) floating interest rates transferable

Types of Money Electronic money card storing some amount of cash deducted when buy goods and services

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