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Money and Banking part 02
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This lesson explains the functions and classification of money.


U
Unacademy user
bhai 27 ...i missed one q that party vala.
Karan Patel
a year ago
any one of above aayega ok
Suraj Chaudhary
a year ago
Ha lg gya pta... Thank you
  1. MONEY AND BANKING PART 02


  2. BARTER SYSTEM TO MONEY 1. Due to the previously discussed shortcomings of barter system, i.e money was introduced. 2. Money helped for smooth transaction of goods and services.


  3. FUNCTIONS OF MONEY 1. Medium of Exchange Facilitates exchanges of goods. . Smoothens transactions It means that money helps to easily purchase or sell goods among 2 people. Solves the issue of double coincidence of wants.


  4. 2. Unit of value Money serves as a unit of measurement, This means that the value of each good and service is represented in terms of monetory unit. - The value of goods in term of money is called its price It means that money helps to easily purchase or sell goods among 2 people. Solves the issue of double coincidence of wants


  5. 3. Store of value It explains importance of money as a unit of storage. This means that the wealth in the form of money can be easily stored for future use. Example : Money can be stored in banks for meeting emergency and future needs.


  6. 4. Standard of deferred payment Payments can be made easily through money Unlike barter system, where goods cannot be used as a medium of exchange for future use, money can easily be used for his purpose. Money can be used to extend loans and payment of interest.


  7. 4. Standard of deferred payment Payments can be made easily through money Unlike barter system, where goods cannot be used as a medium of exchange for future use, money can easily be used for his purpose. Money can be used to extend loans and payment of interest.


  8. CLASSIFICATION OF MONEY Money is classified on the basis of value of money as money and as a commodity. It has 3 types Full bodied money : Any unit of money whose face value and commodity value are equal.During British period, 1 rupee coin was made of silver and it's value was same as its value as a commodity


  9. 2. Representative full bodied money : It is the money made of paper. It's value is higher than it's value as a commodity. It is 100% backed up by gold or silver. For example, a person can exchange the stipulated amount on the paper reciept for an equal amount of gold.


  10. 3. Credit money : It is the money whose value as a commodity is much lower than it's face value. For example, face value of 100 rupee note is much lower if we sell this note as a piece of paper. For example, credit card and bank money,