BARTER SYSTEM

O Means direct exchange of goods and

O

O
O

services Refers to exchange of goods without the use of money For example: Wheat may be exchanged for cloth, house for horses, etc. Economy based on such system is known as barter economy Was in existence in early stages of man

Difficulties in Barter System

O Lack Of Double Coincidence of Wants of
O O O O O

Exchange Lack of Common Measure of Value Lack of Divisibility Problem of Storing Wealth Lack of Standard of Deferred Payment Lack of Specialization

It is because of the above mentioned difficulties of barter system that money was invented and some kind of monetary exchange was evolved in every society.

Meaning of Money
O According to Walker, Money is what

money does. O In the words of D.H. Robertson, Money is a commodity which is used to denote anything which is widely accepted in payments for goods or in discharge of other kinds of business obligations.

Meaning of Money
O Crowthers definition: Anything that is

generally accepted as a means of exchange and at the same time acts as a measure and store of value.

Features of Money
O Money possesses general acceptability.
O It is a medium of exchange. O It measures value of all commodities and

services. O It is the most liquid form of assets. O Money is a means and not an end in itself. O Durability.

Classification of Money
Representative money

Full bodied money

Credit money

Money

CLASSIFICATION OF MONEY
Full Bodied Money
Gold coins Silver coins

Representative Money
Paper money

Credit Money
Token coins Promissory Notes Credit and Debit cards

FUNCTIONS OF MONEY
Functions of money

Primary Functions

Secondary Functions

Contingent Functions

Medium of Exchange

Standards of Deferred Payments

Distribution of National Income Maximization of Satisfaction

Measure of Value

Store of Value

Transfer of Value

Basis of Credit

Productivity of Capital

In short, the main functions of money can be summed up as under:

Money is a matter of functions four. A medium, a measure, a standard, a store. As this does not complete the picture, we may add transferability more.

SUPPLY OF MONEY
O Refers to the total stock of money which is

in circulation in an economy at a given point of time. O Implies the total stock of money held by public (individuals, business firms and institutions) excluding the state treasury, central bank and commercial banks because of these being money creating agencies.

SUPPLY OF MONEY
O Money is a stock as well a flow concept.
O When money supply is viewed at a given

point of time, it is a stock. O Money supply is the quantity of money held by the public at a particular point of time. O When money supply is viewed over a period of time, money supply becomes a flow concept.

SUPPLY OF MONEY
O Money can be spent several times during

a given period, passing from one hand to another. O The average number of times a unit of money circulating from one hand to another in the process of spending during a given year is called as the velocity of circulation of money.

COMPONENTS OF MONEY SUPPLY

Traditional viewpoint

Modern viewpoint

Traditional viewpoint

Modern viewpoint

MEASURES OF MONEY SUPPLY IN INDIA

O Based on two fundamental functions of

money, viz.,medium of exchange and store of value, the Reserve Bank of India has adopted four measures of money supply expressed as M1, M2, M3 and M4

MEASURES OF MONEY SUPPLY AS GIVEN BY THE RBI

C (Currency) + DD (Demand deposits) + OD (Other Deposits) M1 + Saving Deposits with post office savings banks M3 = M1 + Time Deposits with banks

M1 =

M2 =
M3 + Total Post Office Deposits (Excluding National Savings Certificates)

M3 =

M4 =

THANK YOU !!!!

Presented By: Krati Daga Nikhil Takalkar Sneha Motlani Varun Rijhwani