MONEY FOR VALUATION!!! The unit for measuring love is Goat – Commodity Money???? Goat is an animal of the sheep family Goat is an animal of the sheep family

MONEY FOR MONEY FOR VALUATION!!!VALUATION!!!

The unit for measuring love is Goat – Commodity The unit for measuring love is Goat – Commodity Money????Money????

Goat is an animal of the sheep familyGoat is an animal of the sheep family

Spouse is your Husband or WifeSpouse is your Husband or Wife

EVOLUTION OF MONEYEVOLUTION OF MONEY

Money was developed according to Money was developed according to needs & Requirements.needs & Requirements.

Main aim was to remove the Main aim was to remove the shortcomings of the Barter System.shortcomings of the Barter System.

DIFFERENT STAGES OF DIFFERENT STAGES OF EVOLUTION OF MONEYEVOLUTION OF MONEY

1.1. COMMODITY MONEYCOMMODITY MONEY

2.2. METALIC MONEYMETALIC MONEY

3.3. PAPER MONEYPAPER MONEY

4.4. CREDIT MONEYCREDIT MONEY

5.5. ELECTRONIC MONEYELECTRONIC MONEY

1. COMMODITY MONEY1. COMMODITY MONEY

When different commodities were used When different commodities were used as a medium of exchange (BARTER as a medium of exchange (BARTER SYSTEM)SYSTEM)

Cow Heads, Goats, Axes, Dried Fishes Cow Heads, Goats, Axes, Dried Fishes etc were used as medium of exchange.etc were used as medium of exchange.

1. COMMODITY MONEY1. COMMODITY MONEY

Barter System had different Barter System had different problem like:problem like:

1.1. Storing ProblemStoring Problem

2.2. Durability problemDurability problem

3.3. Transportation problemTransportation problem

4.4. Divisibility problem Divisibility problem

2. METALLIC MONEY2. METALLIC MONEY

The next step in the evolution was The next step in the evolution was the discovery of precious metals like the discovery of precious metals like Gold, Silver, Copper.Gold, Silver, Copper.

“ “ Metallic Money consist of coins Metallic Money consist of coins made of Gold, Silver, Copper or made of Gold, Silver, Copper or nickel as a mode of payment.”nickel as a mode of payment.”


UnCoined MetalsUnCoined Metals Metals were not used as a coin but as a Metals were not used as a coin but as a

Bullion.Bullion. This created the problem of measuring This created the problem of measuring

the weight & Value.the weight & Value. Supply of money also became problem Supply of money also became problem

when the mines were fully used up or when the mines were fully used up or new mines were discovered.new mines were discovered.

Transportation & Storage problem were Transportation & Storage problem were also there.also there.


Coined Metals.Coined Metals. As a next step, standard coins were As a next step, standard coins were

created.created. They had a standard weight & value.They had a standard weight & value. Problem of un coined metals started Problem of un coined metals started

here as well.here as well.


Metallic money can be: Metallic money can be:

FULLY BODIEDFULLY BODIED

Whose Face Value is equal to the Whose Face Value is equal to the value of metal contained in it.value of metal contained in it.

TOKEN MONEYTOKEN MONEY

Its Face Value is Higher than Its Face Value is Higher than Intrinsic Value (Value of Metal)Intrinsic Value (Value of Metal)

3. PAPER MONEY3. PAPER MONEY


When paper currency was When paper currency was introduced as a mode of payment.introduced as a mode of payment.

Originated as a receipt issued by Originated as a receipt issued by Goldsmiths.Goldsmiths.

These receipts were then later on These receipts were then later on used for payments.used for payments.

Difference in the value of receipts Difference in the value of receipts was becoming a problem then. was becoming a problem then.


PAPER MONEYPAPER MONEY Refers to the Notes issued by the Refers to the Notes issued by the

State or by the Bank, usually the State or by the Bank, usually the Central bank.Central bank.

Paper Money can be:Paper Money can be:

1.1. Representative Paper Money.Representative Paper Money.

2.2. Convertible Paper Money.Convertible Paper Money.

3.3. Fait Paper Money.Fait Paper Money.


Representative Paper Money.Representative Paper Money.It is that money which is fully backed by It is that money which is fully backed by equivalent metallic reserves.equivalent metallic reserves.

Convertible Paper MoneyConvertible Paper MoneyWhich is convertible into coins on demand.Which is convertible into coins on demand.

Fait Paper MoneyFait Paper MoneyWhich is not redeemable or convertible into Which is not redeemable or convertible into Gold or Silver on demand. It is accepted Gold or Silver on demand. It is accepted because it is declared legal tender by the because it is declared legal tender by the issuing authority and has general issuing authority and has general acceptance as a medium of exchange. The acceptance as a medium of exchange. The intrinsic value of Fait money is Nil.intrinsic value of Fait money is Nil.

4. CREDIT MONEY4. CREDIT MONEY

Includes Bank money (different Includes Bank money (different instruments offered by the Banks.)instruments offered by the Banks.)

Cheques, Drafts, P.O, T.C are Cheques, Drafts, P.O, T.C are examples.examples.

Convenient, Safe and easily Convenient, Safe and easily convertible into cash.convertible into cash.

Its like Near Money. Its like Near Money.

5. ELECTRONIC MONEY5. ELECTRONIC MONEY

5. ELECTRONIC MONEY5. ELECTRONIC MONEY

Electronic money (also known as e-money, Electronic money (also known as e-money, electronic cash, electronic currency, digital electronic cash, electronic currency, digital

money, digital cash or digital currency) refers money, digital cash or digital currency) refers to money or scrip which is exchanged only to money or scrip which is exchanged only

electronically. Typically, this involves use of electronically. Typically, this involves use of computer networks, the internet and digital computer networks, the internet and digital

stored value systems. stored value systems.

CHARACTERISTICS OF CHARACTERISTICS OF MONEYMONEY

CHARACTERISTICS OF CHARACTERISTICS OF MONEYMONEY

General Acceptability.General Acceptability. Stability of Value.Stability of Value. Transportability.Transportability. Storeability.Storeability. Divisibility.Divisibility. Homogeneity.Homogeneity. Cognizability.Cognizability. Malleability.Malleability.

LEGAL TENDER.LEGAL TENDER.

“ “ Means of payment, which has state’s Means of payment, which has state’s sanction behind it and can be used sanction behind it and can be used to settlement of Debt obligations”to settlement of Debt obligations”

Debtor can compel creditor to Debtor can compel creditor to accept it.accept it.

1.1. Unlimited Legal Tender.Unlimited Legal Tender.

2.2. Limited Legal Tender.Limited Legal Tender.

LEGAL TENDER.LEGAL TENDER.

Unlimited Legal Tender.Unlimited Legal Tender. Money in terms of which debt can be Money in terms of which debt can be

legally paid up to any amount.legally paid up to any amount. All type of Currency Notes.All type of Currency Notes.

Limited legal tender.Limited legal tender. Money in which debt can be paid to Money in which debt can be paid to

a certain limit.a certain limit. 50 Paisa Coins.50 Paisa Coins.

MEASURING MONEYMEASURING MONEY

Changes in the amount of money in Changes in the amount of money in the economy are related to changes the economy are related to changes in Interest rates, Economic in Interest rates, Economic Development & Inflation.Development & Inflation.

Inflation: rise in price level; makes Inflation: rise in price level; makes the value of the money less.the value of the money less.

Measured by Measured by Money Aggregates Money Aggregates M1, M2, M3.M1, M2, M3.


M1:M1: Currency and checkable Deposit Accounts and Currency and checkable Deposit Accounts and

other bank money instruments.other bank money instruments. Most Liquid assets of a Financial System.Most Liquid assets of a Financial System.M2:M2: M1 + Those assets which can’t be used directly M1 + Those assets which can’t be used directly

as a mode of payment and converted into as a mode of payment and converted into currency.currency.

Small denomination Time deposit etc.Small denomination Time deposit etc.M3:M3: M2+ Long term investments.M2+ Long term investments. Assets which are important to large institution Assets which are important to large institution

and not to individuals.and not to individuals.


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MONEY FOR VALUATION!!! The unit for measuring love is Goat – Commodity Money???? Goat is an animal of the sheep family Goat is an animal of the sheep family