Chryszel Joy P.

Robles
BSAT-3
The Functions of the Money in Economy
Money is any good that is widely accepted in exchange of goods and services, as well as
payment of debts.
1. A medium of exchange Money is used as a medium of exchange because it is an
efficient way to allocate resources. Economies have goods and services that need to
be allocated to people. The best way to do this is to establish a structured currency.
If we didnt have currencies, people likely would be bartering their way through life.
Economics as we know, it would take on a different role, one that involved a survival
of fittest.
2. A unit of account - Money helps us to understand relative values of goods and
services. We can gauge how much a day of work is worth in terms of goods and
services. The value of a diamond ring can be distinguished from the value of shoes.
Money allows us to determine how valuable labor and wages are relative to goods
and services.
3. A store of value - We can exchange money for a good or services at any time
without worrying about our money expiring. Our currency doesnt rot, wither or melt
away. It can be kept for long periods of time without a loss of exterior value.
However, the value money holds in terms of what goods and services it can purchase
varies as a result of the fluctuating forces of supply and demand.
4. 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.

Role of BSP and other Banks

1. To promote price stability conducive to a balanced and sustainable growth of the
economy.
2. Implement a monetary policy that provides stable growth and employment.
3. Manage the production and distribution of nations currency.
Overview of Functions and Operations
Objectives
The BSPs primary objective is to maintain price stability conducive to a balanced and
sustainable economic growth. The BSP also aims to promote and preserve monetary
stability and the convertibility of the national currency.
Responsibilities
The BSP provides policy directions in the areas of money, banking and credit. It supervises
operations of banks and exercises regulatory powers over non-bank financial institutions
with quasi-banking functions.

Chryszel Joy P. Robles

BSAT-3
Under the New Central Bank Act, the BSP performs the following functions, all of which
relate to its status as the Republics central monetary authority.

Liquidity Management. The BSP formulates and implements monetary policy

aimed at influencing money supply consistent with its primary objective to maintain
price stability.

Currency issue. The BSP has the exclusive power to issue the national currency. All
notes and coins issued by the BSP are fully guaranteed by the Government and are
considered legal tender for all private and public debts.

Lender of last resort. The BSP extends discounts, loans and advances to banking
institutions for liquidity purposes.

Financial Supervision. The BSP supervises banks and exercises regulatory powers
over non-bank institutions performing quasi-banking functions.

Management of foreign currency reserves. The BSP seeks to maintain sufficient

international reserves to meet any foreseeable net demands for foreign currencies in
order to preserve the international stability and convertibility of the Philippine peso.

Determination of exchange rate policy. The BSP determines the exchange rate
policy of the Philippines. Currently, the BSP adheres to a market-oriented foreign
exchange rate policy such that the role of Bangko Sentral is principally to ensure
orderly conditions in the market.

Other activities. The BSP functions as the banker, financial advisor and official
depository of the Government, its political subdivisions and instrumentalities and
government-owned and -controlled corporations.