MONEY AND BANKING PART 01
WHAT IS MONEY? 1. Money is anything that is widely used and accepted in transactions involving the transfer of goods from one person to another. 2. Money is something which facilitates the transaction of goods A medium of exchange, a unit of accounting and a store of value 3.
DEFINITION OF MONEY Financial definition : Money is anything declared by law as money. O Legal Definition : Money is anything that acts as a medium of exchange, a store of value and a unit of accounting.
Differentiation of money by economists ommodity money : A good whose value 1. C serves as the value of money. Such as gold coins. Fiat money : The value of which is less thar the value it represents as the value of money Such as dollar bills 2. 3. Bank money : Book credit that banks extend to their depositors. Such as transaction made through cheque book.
ORIGIN OF MONEY Money was required by people to buy and sell goods with each other. Earlier, animal skin, domestic livestock, salt etc were used as a medium of exchange. This posed many problems as there was not a unit of measurement. Hence, a barter system was developed.
Barter System O Barter system is a system in which goods are exchanged for goods among two people. l Double coincidence of wants 1 This is also called good for good exchange It was introduced in Egpyt. system.
Drawbacks of barter system Required double co-incidence of wants 0 Absence of a common unit of exchange I No concept of future payments Difficult to store wealth