Money:

Money is any item that is generally accepted as payment for goods and services

and repayment of debts in a particular country or socio-economic context. It is a medium that

can be exchanged for goods and services and is used as a measure of their values on the
market, including among its forms a commodity such as gold, an officially issued coin or note, or
a deposit in a checking account or other readily liquefiable account. Money is an official
currency, coins, notes and negotiable paper issued by a government.
Money is a matter of functions four,
a. Medium
b. Measure
c. Standard
d. Store
Money must have:

Purchasing Power
Exchangeability in terms of goods & service
General acceptability

Features of Money: 4 basic functions or features of money

Medium of exchange
Store of value
Deferred payment
Measure of value

Medium of exchange

When money is used to intermediate the exchange of goods and services, it is performing a
function as a medium of exchange. It thereby avoids the inefficiencies of a barter system, such
as the "double coincidence of wants" problem. Money's most important usage is as a method for
comparing the values of dissimilar objects.
Measure of value
In economics a unit of account is a standard numerical monetary unit of measurement of the
market value of goods, services, and other transactions. Also known as a "measure" or
"standard" of relative worth and deferred payment, Money acts as a standard measure and
common denomination of trade. It is thus a basis for quoting and bargaining of prices. It is
necessary for developing efficient accounting systems.
Standard of deferred payment
A "standard of deferred payment" is an accepted way to settle a debt a unit in which debts are
denominated, and the status of money as legal tender, in those jurisdictions which have this

concept, states that it may function for the discharge of debts. When debts are denominated in
money, the real value of debts may change due to inflation and deflation, and for sovereign and
international debts via debasement and devaluation.
Store of value
To act as a store of value, money must be able to be reliably saved, stored, and retrieved and
be predictably usable as a medium of exchange when it is retrieved. The value of the money
must also remain stable over time. Some have argued that inflation, by reducing the value of
money, diminishes the ability of the money to function as a store of value.

Attributes of Good Money:

Store value
Capacity to use as deferred payment
Homogeneity: Depending on the different types of currency that are available, money
within that specific currency must look the same. This also allows for money to be
counted and measured accurately. For exchanging something, same kind of currency is
necessary.
Portable/transferable: This means that money can be easily moved from one location
to another when such movement is needed to complete exchanges
Divisibility: This means money can be divided into small increments that can be used
in exchange for goods of varying values. Divisible into smaller units without loss of
value; precious metals can be coined from bars, or melted down into bars again.
Durability: This means that an item retains the same shape, form, and substance over
an extended period of time; that it does not easily decompose, deteriorate, degrade, or
otherwise change form.
Non-counterfeit ability: This means that money cannot be easily duplicated. A given
item cannot function as a medium of exchange if everyone is able to "print up," "whip
up," or "make up" a batch of money any time that they want.

Demand and supply of money:

http://cas.umkc.edu/econ/economics/faculty/Forstater/201/Fall2005/Money.pdf

Narrow money: Money in forms that can be used as a medium of exchange, generally notes,
coins, and certain balances held by banks. A measure of the money supply used by the various
central banks that includes only currency in circulation and very near money instruments. In the
Federal Reserve System, narrow money includes all physical currency and deposits in checking
accounts as well as Negotiable Orders Withdrawal accounts. It does not include savings
accounts, certificates of deposit, or money market accounts. This is called narrow money
because it applies the most restrictive definition of money. It is also called the money base.
M1= C+DD+OD

C= Currency+ coins [currency outside bank]

DD= Demand deposit [current account]

OD= other deposit

Broad money: In economics, broad money is a measure of the money supply that includes
more than just physical money such as currency and coins (also termed narrow money). It
generally includes demand deposits at commercial banks, and any monies held in easily
accessible accounts. Components of broad money are still very liquid, and non-cash
components can usually be converted into cash very easily.
One measure of broad money is M4, which includes currency and coins, and deposits in
checking accounts, savings accounts and small time deposits, overnight repos at commercial
banks, and non-institutional money market accounts. This is the main measure of the money
supply, and is the economic indicator usually used to assess the amount of liquidity in the
economy, as it is relatively easy to track.
M4= M3+all deposit with post office+ time deposit
= C+DD+OD+ all deposit with post office+ time deposit
C= Currency+ coins [currency outside bank]
DD= Demand deposit [current account]
OD= other deposit
OD= other deposit

1. How money evolved?

2. Supply or measure of money?