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Nature and Function of Money
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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
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Content 1.Barter System 2. Functions of Money 3. Properties of Money
4. Types of Money
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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.
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Inconveniences of Barter
Difficulty in meeting double coincidence of wants
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Inconveniences of Barter
Higher cost of agreeing on an exchange ratio.
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Inconveniences of Barter
Lack of common measure of value Inconvenience of storing wealth
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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
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Content 1.Barter System 2. Functions of Money 3. Properties of Money
$$$ 2. Functions of Money 3. Properties of Money 4. Types of Money
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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
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So, what is MONEY ? MONEY Money can be any asset that is generally acceptable as a medium of exchange for settling payments or debts.
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Content 1.Barter System 2. Functions of Money 3. Properties of Money
4. Types of Money
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Properties of Money Generally acceptable Limited in supply Durable
Portable Divisible Homogeneous
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Content 1.Barter System 2. Functions of Money 3. Properties of Money
$ 5 4. Types of Money
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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
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Types of Money Inconvertible paper money also called ‘Fiat Money’
simply declared by the government as money legal tender e.g. notes and coins
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Types of Money Deposit money Demand deposit current account
banks do not give any interest not legal tender e.g. cheque
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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
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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
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Types of Money Electronic money card storing some amount of cash
deducted when buy goods and services
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THE END
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