MONEY POWER POINT

MONEY : 

MONEY A.MEENAIAH LECTURER IN ECONOMICS N.G COLLEGE NALGONDA

INTRODUCTION : 

INTRODUCTION Money is, in fact, one of the greatest inventions of man. Since money represents generalized purchasing power, it has been the object of Man’s desires throughout the ages. Due to inconveniences of barter system, the need for introducing something as a medium of exchange arises. The development of money has passed through various stages in accordance with time, place and circumstances with the progress of civilization of mankind.

2. BARTER SYSTEM AND ITS DIFFICULTIES : 

2. BARTER SYSTEM AND ITS DIFFICULTIES 1. Lack of any Common Unit of Measurement of Value . 2. Lack of Double Coincidence of Wants . 3. Lack of Means of Sub-division . 4. Lack of any Common Unit .

EVOLUTION OF MONEY : 

EVOLUTION OF MONEY Money was developed according to needs & Requirements. Main aim was to remove the shortcomings of the Barter System.

EVOLUTION OF MONEYThe different types of money are explained in brief as follows:- : 

EVOLUTION OF MONEYThe different types of money are explained in brief as follows:- Animal Money and Commodity Money : Metallic Money: Paper Money: Bank Money: Or Credit money: Electronic money:

1. COMMODITY MONEY : 

1. COMMODITY MONEY When different commodities were used as a medium of exchange (BARTER SYSTEM) Cow Heads, Goats, Axes, Dried Fishes etc were used as medium of exchange.

2. METALLIC MONEY : 

2. METALLIC MONEY The next step in the evolution was the discovery of precious metals like Gold, Silver, Copper. “ Metallic Money consist of coins made of Gold, Silver, Copper or nickel as a mode of payment.”

2. METALLIC MONEY : 

2. METALLIC MONEY UnCoined Metals Metals were not used as a coin but as a Bullion. This created the problem of measuring the weight & Value. Supply of money also became problem when the mines were fully used up or new mines were discovered. Transportation & Storage problem were also there.

2. METALLIC MONEY : 

2. METALLIC MONEY Coined Metals. As a next step, standard coins were created. They had a standard weight & value. Problem of un coined metals started here as well.

2. METALLIC MONEY : 

2. METALLIC MONEY Metallic money can be: FULLY BODIED Whose Face Value is equal to the value of metal contained in it. TOKEN MONEY Its Face Value is Higher than Intrinsic Value (Value of Metal)

3. PAPER MONEY : 

3. PAPER MONEY

3. PAPER MONEY : 

3. PAPER MONEY PAPER MONEY Refers to the Notes issued by the State or by the Bank, usually the Central bank. Paper Money can be: Representative Paper Money. Convertible Paper Money. Fait Paper Money.

4. CREDIT MONEY : 

4. CREDIT MONEY Includes Bank money (different instruments offered by the Banks.) Cheques, Drafts, P.O, T.C are examples. Convenient, Safe and easily convertible into cash. Its like Near Money.

5. ELECTRONIC MONEY : 

5. ELECTRONIC MONEY

5. ELECTRONIC MONEY : 

5. ELECTRONIC MONEY Electronic money (also known as e-money, electronic cash, electronic currency, digital money, digital cash or digital currency) refers to money or scrip which is exchanged only electronically. Typically, this involves use of computer networks, the internet and digital stored value systems.

FUNCTIONS OF MONEY : 

FUNCTIONS OF MONEY “Every branch of knowledge has its fundamental discovery. In mechanics, it is the wheel; in science, fire; in politics, the vote. Similarly, in economics in the whole commercial side of Man’s social existence, money is the essential invention on which all the rest is based” Crowther, An Outline of Money. 1. Money as a Medium of Exchange . 2. Money as Measure of Value: 3. Standard of Deferred Payment . 4. Money as a Store of Value:

Measurement of Money Supply : 

Measurement of Money Supply In India, there are four alternative measures of money supply, popularly known as M1, M2, M3, and M4. M1 Measurement: M1=C+DD+OD. C: Refers to currency and includes coins and paper notes held by the public. DD: Refers to demand deposits of the people with the commercial banks. OD: Refers to other deposits which includes demand deposits with RBI of foreign central banks and of the foreign government , deposits of international financial institutions like IMF, World Bank.

M2 Measurement : 

M2 Measurement M2 Measurement: M1+ Deposits with post office saving bank. M2 measurement is broader concept of the supply of money compared to M1. Besides all the components of M1, it also includes the saving of the people with the post office.

M3 Measurement : 

M3 Measurement M3 Measurement: M1+ Time deposits with the commercial banks. M3 measurement also broader concept of the supply of money compared to M1. Besides all the components of M1, it also includes the deposits of the people with the commercial banks.

M4 Measurement: : 

M4 Measurement: M4 Measurement: M4= M3+Total deposits with the post office (other then NSC). M4 measurement concept is much broader then M3, besides all the components of M3. It also includes total deposits with post office.

Classification of Money. : 

Classification of Money. 1) Classification on the basis of nature of money . J.M. Keynes classified money under the following two heads on the basis of its nature: 1) Actual Money, and 2) Money of Account. Actual Money : By actual money we mean money which is current in practice in a country. Actual money is the medium of exchange as well as the basis of deferred payments. Money of Account : This refers to that type of money in terms of which the accounts are maintained in the country. The actual money in India has undergone transformation, but the Rupee even today continues to be the money of account. Money of account is thus static in nature and does not undergo changes with the passage of time.

2) Classification on the basis of legality : 

2) Classification on the basis of legality 1)Legal Tender Money ; and 2) Optional Money. Legal Tender Money : It is that money which is accepted as a means of payment both by the government as well as the people. This type of money has legal sanction behind it. No one can refuse to accept it as a means of payment. Legal tender money can be further sub divided under two heads : (i) Limited Legal Tender, and (ii) Unlimited Legal Tender. Optional Money : It is that money which is ordinarily accepted by the people, but has no legal sanction behind it. No one can be forced to accept this type of money against his wishes. It is optional money

3) Classification on the Basis of Commodity : 

3) Classification on the Basis of Commodity (1) Metallic Money, and (2) Paper Money. Metallic Money :This money is made of a particular metal (i.e. gold, silver, copper, nickel, etc.) Metallic money is further classified under three sub-heads: (a) Standard Money, (b) Token Money.

Paper Money . : 

Paper Money . Paper money has a long history to its credit. China was the first country in the world to make use of This money. The use of paper money gradually spread to other countries. But paper money on a large scale began to be used only in the 17th and 18th centuries. The use of paper money began in India in the 19th century. The Bank of Bengal was the first bank in India to have issued paper currency in 1806. Paper money can be classified under four heads : (i) Representative Paper Money, (ii) Convertible Paper Money, (iii) Inconvertible Paper Money, and (iv) Fiat Money.

4) Classification on the basis of liquidity : 

4) Classification on the basis of liquidity On the basis of liquidity, money can be classified under two sub-heads. (i) Actual Money. (ii) Near Money.