1. Money :Meaning, Evolution and Functions

2. K K Dubey (PGT Eco) UNIT : MONEY AND BANKING Class: XII

5. BARTER SYSTEM
Direct exchange of goods for goods is called barter system.
An economy based on barter exchange is called commodity economy

6. Drawbacks of Barter System
Absence of common measure of value
Lack of double coincidence of wants
Absence of means of subdivision
Difficulties in storing wealth
Lack of satisfactory units to engage in contracts

7. Need for a common measure and unit of account ?
MONEY

8. “Money is, what MONEY does !”
What is MONEY?
“Money is, what MONEY does !”

9. FUNCTIONS OF MONEY Primary Functions: 1. Medium of Exchange
2. Measure of value
Secondary Functions:
3. Store of Value
4. Standard of Deferred payments
5. Transfer of Value

10. Money as a Medium of Exchange
It is the most essential function of Money.
It can be used as a medium of making payments for all goods and services.
The major difficulty of Barter system, lack of double coincidence of wants has removed.
It has the quality of general acceptability.
Purchase and sale of goods can be conducted independently of one another.

11. Money as a Measure of Value
All prices of goods and services are expressed in terms of Money
It works as a common denomination for value of goods and services
It simplifies the process of exchange
It works as a measuring rod which expresses the value of goods and services
It permits to compare the relative values of any two commodities.

12. Money as a Store of Value
It is the most convenient way to store wealth
It provides security to individuals to meet unforeseen contingencies, emergencies and to pay future debts
It helps to transfer purchasing power from present to future
Money is easy to store and is not perishable

13. Money as a Standard of Deferred Payments
Money serves as a standard of debt
Deferred payments refers to, payments which are to be made in near future
Use of money immensely simplified the borrowing and lending operations
Money acts as Standard of Deferred Payments due to:
a. Value of money remains almost constant
b. It is generally accepted
c. It is more durable as compared to goods

14. Money as a Transfer of Value
It transfers the value of durable and immovable goods from one place to another
It provides mobility to machinery, land and goods, which accelerates trade and industry
It has the merit of liquidity
Money is the most liquid of all asset

15. “Money is anything which is generally accepted as a medium of exchange, measure of value, store of value and means for standard of deferred payments”

16. Barter System and Money

17. Money has overcome the Drawbacks of Barter System
Removes the problem of lack of double coincidence of wants
Provides a common measure of value
Goods can be stored easily and economically
Simplifies borrowing and lending operations
It is the most liquid asset
Barter Economy
Lack of double coincidence of wants
No common measure of value
Difficulty in storing perishable goods and is expensive
Difficulty in borrowing and lending operations
Lacks liquidity

18. Evolution of Money

20. Now what's next?

21. Thanks