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Ecs1601 Assignment 1 Semester 2 2023
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ECS1601 ASSIGNMENT 2 SEMESTER 2 2023 (100%)(DUE 7 SEPTEMBER 2023)
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MONEY AND BANKINGUnit 2: Learning Outcomes: -
Prepared By: -
Money - meaning and supply of money -
Currency held by the public and net Mr. NIRAJ KUMAR TIWARY
demand deposits held by commercial PGT ECONOMICS
banks. Money creation by the commercial KENDRIYA VIDYALAYA SIWAN,
banking system. Central bank and its PATNA REGION
functions (example of the Reserve Bank of
India): Bank of issue, Govt. Bank, Banker's
Bank, Control of Credit through Bank
Rate, CRR, SLR, Repo Rate and Reverse
Repo Rate, Open Market Operations,
Margin requirement.
MEANING OF MONEY
Money is anything that is generally accepted as payment for goods and services and
repayment of debts and that serves as a medium of exchange.
A medium of exchange is anything that is widely accepted as a means of payments.
Definitions: - Many economists developed definition for money. Among these, definitions
of Walker and Crowther are given below:
“Money is, what money does” - Walker.
,“Money can be anything that is generally acceptable as a means of exchange
and at the same time acts as a measure and a store of value ”. –Crowther
The narrow definition of money is based on the function of money as a
medium of exchange and includes in it only currency and chequable deposits.
Those assets which are widely used as a store of value like saving and fixed
deposits at banks are called NEAR MONEY and are frequently included only in
a broader definition of money.
FUNCTIONS OF MONEY: -
Primary or Basic Functions:-
Medium of Exchange :-Money acts as a medium
of exchange of all goods and services. It has
removed the difficulty of double coincidence of
wants found under the barter system.
Measure of Value :-Money helps to measure value of
goods and services in terms of price. This function has
greatly facilitated the process of exchange of
different goods and services.
, Secondary Functions:-
Store of Value or Wealth:-Money is the most
convenient and economical means to store wealth
which does not lose its value so quickly over time.
Hence value of good is indirectly stored in money.
Standard of Deferred Payments:-Deferred
payments are those payments which are
promised to be made infuture. Money acts as a
means of deferred payments mainly because it
has general acceptability.
Transfer of Value:-This function of money is derived from the
store of value function of money.Money is used to transfer
value from one place to another or from one person to
another.
1. Medium of Exchange: Money has removed the major difficulty of the double coincidence of
wants.
2. Measure of value: Money has become measuring rod to measure the value of goods and services
and is expressed in terms of price.
3. Store of value: It is very convenient, easy and economical to store the value and has got general
acceptability which was lacking in the barter system.
4. Standard of deferred payments: Money has simplified the borrowing and lending of operations
which were difficult under barter system. It also encourages capital formation.
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