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

EVOLUTION OF MONEY Money was developed according to needs & Requirements. Main aim was to remove the shortcomings of the Barter System.

DIFFERENT STAGES OF EVOLUTION OF MONEY COMMODITY MONEY METALIC MONEY PAPER MONEY CREDIT MONEY ELECTRONIC MONEY

1. COMMODITY MONEY When different commodities were used as a medium of exchange (BARTER SYSTEM) Cow Heads, Goats, Axes, Dried Fishes etc were used as medium of exchange.

1. COMMODITY MONEY Barter System had different problem like: Storing Problem Durability problem Transportation problem Divisibility problem

2. METALLIC MONEY The next step in the evolution was the discovery of precious metals like Gold, Silver, Copper. “ Metallic Money consist of coins made of Gold, Silver, Copper or nickel as a mode of payment.”

2. METALLIC MONEY UnCoined Metals Metals were not used as a coin but as a Bullion. This created the problem of measuring the weight & Value. Supply of money also became problem when the mines were fully used up or new mines were discovered. Transportation & Storage problem were also there.

2. METALLIC MONEY Coined Metals. As a next step, standard coins were created. They had a standard weight & value. Problem of un coined metals started here as well.

2. METALLIC MONEY Metallic money can be: FULLY BODIED Whose Face Value is equal to the value of metal contained in it. TOKEN MONEY Its Face Value is Higher than Intrinsic Value (Value of Metal)

3. PAPER MONEY

3. PAPER MONEY When paper currency was introduced as a mode of payment. Originated as a receipt issued by Goldsmiths. These receipts were then later on used for payments. Difference in the value of receipts was becoming a problem then.

3. PAPER MONEY PAPER MONEY Refers to the Notes issued by the State or by the Bank, usually the Central bank. Paper Money can be: Representative Paper Money. Convertible Paper Money. Fait Paper Money.

3. PAPER MONEY Representative Paper Money. It is that money which is fully backed by equivalent metallic reserves. Convertible Paper Money Which is convertible into coins on demand. Fait Paper Money Which is not redeemable or convertible into Gold or Silver on demand. It is accepted because it is declared legal tender by the issuing authority and has general acceptance as a medium of exchange. The intrinsic value of Fait money is Nil.

4. CREDIT MONEY Includes Bank money (different instruments offered by the Banks.) Cheques, Drafts, P.O, T.C are examples. Convenient, Safe and easily convertible into cash. Its like Near Money.

5. ELECTRONIC MONEY

5. ELECTRONIC MONEY Electronic money (also known as e-money, electronic cash, electronic currency, digital money, digital cash or digital currency) refers to money or scrip which is exchanged only electronically. Typically, this involves use of computer networks, the internet and digital stored value systems.

CHARACTERISTICS OF MONEY

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

LEGAL TENDER. “ Means of payment, which has state’s sanction behind it and can be used to settlement of Debt obligations” Debtor can compel creditor to accept it. Unlimited Legal Tender. Limited Legal Tender.

LEGAL TENDER. Unlimited Legal Tender. Money in terms of which debt can be legally paid up to any amount. All type of Currency Notes. Limited legal tender. Money in which debt can be paid to a certain limit. 50 Paisa Coins.

MEASURING MONEY Changes in the amount of money in the economy are related to changes in Interest rates, Economic Development & Inflation. Inflation: rise in price level; makes the value of the money less. Measured by Money Aggregates M1, M2, M3.

MEASURING MONEY M1: Currency and checkable Deposit Accounts and other bank money instruments. Most Liquid assets of a Financial System. M2: M1 + Those assets which can’t be used directly as a mode of payment and converted into currency. Small denomination Time deposit etc. M3: M2+ Long term investments. Assets which are important to large institution and not to individuals.

MEASURING MONEY