1. (B.com 1st sem )
DEVI AHILYA
VISHWAVIDHYALAYA,
INDORE
ACCOUNTANCY ASSIGNMENT
SUBMITTED TO :
Anand Yadav Sir
SCHOOL OF COMMERCE Topic : MONEY
SUBMITTED BY :
SATYAM SINGH PARIHAR
2. FLOW CHART : MONEY
MONEY ITS
ORIGIN EVOLUTION
FORMS
OF
MONEY
SUPPLY
OF
MONEY
-Definition
- Origin of money
- Functions of money
- Barter system
- C-C Economy
- Drawbacks of barter system
- Evolution of money
- Stages of Evolution
- Forms of Money
- Supply of Money
- Measures of Money Supply
- Three types (M1, M2, M3)
- Demand Deposit
3. MONEY :
A thing which is commonly
accepted as a medium of
exchange is called money.
❖ A rupee in India is money, as it is a
commonly accepted medium of
exchange here. Likewise, a dollar in
USA is money.
4. • ORIGIN OF MONEY :
Initially, coins of gold and silver were introduced as
money. Many different objects have functioned as money
throughout history, including seashells, stones, metals,
and paper.
The origin of money is related to the need to facilitate
exchange.
5. Functions of money
• Money acts as a medium of exchange,
• Money serves as a store of value (people save in terms of money),
• Money is a measure of value: market price of goods and services is
expressed in terms of money, and
• Money serves as a standard for deferred payments (future payments)·
6.
7. • BARTER SYSTEM :
In olden days, goods were exchanged for goods. There was no money.
Thus, a tailor would make clothes in return for wheat from the farmer;
a farm worker would get grains as a reward for his labour, and so on.
This system of exchange was known as barter system.
9. C-C Economy
▪ C stands for commodity. C-C economy is the
one in which commodities are exchanged for
commodities or in which goods are
exchanged for goods.
▪ C-C exchange refers to Barter System of
Exchange.
Hence, C-C economy is an economy dominated by
Barter System of Exchange.
10. • Drawbacks of Barter System:
1. Lack of double coincidence of wants.
2. Lack of a common measure of value.
3. Indivisibility of certain goods.
4. Difficulty in making deferred payments.
5. Difficulty in storing value.
11. EVOLUTION OF MONEY :
The evolution of money is a series of
development in the form of the acceptable
medium of exchange throughout history.
❖ There have been different forms of money throughout
human history that played the role of facilitating economic
transactions. This is what we mean by the evolution of
money.
12.
13. STAGES OF EVOLUTION :
❖ Stage One: Medium of Exchanges
The standard goods were widely
understood as usually valuable by
practically everyone. For example,
wheat, salt, rice, and other food products
were always needed to create meals.
In fact, salt was used as a form of currency long after the development
of metallic currencies.
14. ❖ Stage Two: Metallic Money
Metallic money originally began as physical
coins minted out of the valuable metals of the
time and place, like gold, silver, bronze, copper,
and more.
15. ❖ Stage Three: Paper Money
Paper currencies were easier for the
government to issue and easier to
transport. After all, paper is much
lighter than coins !
The first paper money began as
banknotes, which were essentially letters
of debt.
16. ❖ Stage Four: Plastic Money
Plastic money arose as a direct
consequence of electronic banking
systems; after all, modern credit and
debit cards wouldn’t work if they
couldn’t access funds records
electronically at a moment’s notice.
17. ❖ Stage Five: Cryptocurrencies
Cryptocurrencies should make it much
easier for individuals to retain control
over their finances with greater reliability
and security than ever before. Crypto
tokens use variations of encryption
algorithms in order to verify and confirm
the legitimacy of transactions.
18. ❖ FORMS OF MONEY :
(i) Fiat money and fiduciary money, and
(ii) Full bodied money and credit money.
Forms of money
1. Fiat money
and fiduciary
money, and
2. Full bodied
money and
credit money.
1) Fiat Money and
Fiduciary Money Fiat
money refers to that
money which is issued by
order/ authority of the
government.
2) It includes all notes and
coins which the people in
a country are legally
bound to accept as a
medium of exchange.
3) Fiduciary money is that
money which is accepted
as a medium of exchange
because of the trust
between the payer and
the payee.
➢ Example: Cheques are fiduciary money as these are accepted as a means of payment on the
basis of trust, not on the basis of any order of the government.
19. (ii) Full bodied money and credit money :
Full bodied money refers to money in terms of coins whose commodity
value is equal to the money value as and when these are issued.
Example: A rupee coin during the British period in India was made of silver.
Commodity value of the coin was equal to its money value at the time of its
issuing. Or, the market value of the silver contained in the coin was equal to
rs1.
➢ Credit money refers to that money of which money value is more than
commodity value.
Example: What is the market value of the metal that the rupee coin is made of in
India? Obviously, much lower than the money value of the rupee coin. Otherwise,
people would have melted the coins and sold the metal in the market at a price
greater than one rupee.
20. SUPPLY OF MONEY :
• Supply of money is a stock concept. It
refers to total stock of money ( of all
types) held by the people of a country at
a point of time.
❑ Money supply is money that control by Central Bank.
❑ Money supply does not respond to change in the
interest rate.
❑ Therefore, the supply for money curve is vertical line
The methods used to measure supply are called M1,
M2 and M3.
21. ▪ Measures of Money Supply :
In India, there are four alternative measures of
money supply, popularly known as M1 , M2 , M3 ,
and M4 . Of these, only M1 measure is discussed
here, as prescribed in the syllabus. M2 , M3 and M4
measures are given in 'Ability Zone' of the chapter
for general reference.
22. ➢ The standard practice is to consider (I) Currency with the public, and (ii) Demand
deposits of the people with the commercial banks as the two principal components
of money supply in the economy.
23. M1 is the narrowest definition of the supply of money
M1 is also money that directly used for transactions
Consists:
Currency – includes coins and paper money issued by Bank
Negara Malaysia
Checkable Deposits – also called as demand deposits
Therefore ; M1 = Currency + Checkable Deposits
M1: Narrow Money
24. M2: Near Money Plus M1
M2 is broader definition of the supply of
money
Consists:
M1 (currency and checkable deposits)
Savings and fixed deposits in
commercial banks
Negotiable certificate of deposits
Repo
Bank Negara certificates
M2 = M1 + Savings and fixed deposits in Commercial Banks + NCD + Repo + BNM
certificates
Or
Near Money = M2 – M1
25. • M3: Broad Money
M3 is the measure of money supply
which is the broadest definition
Consists
M2 (M1 + Near Money)
Savings and fixed deposits in the
other financial institutions
M3 = M2 + Savings and fixed deposits in other financial institutions
Or
Broad Near Money = M3 – M1
• DEMAND DEPOSIT
A demand deposit is a type
of deposit that lets you
withdraw your money—at
any time, for any reason—
without having to notify your
bank.
26. Who Supplies Money ?
Suppliers of money include:
(i) central bank of the country (RBI in India),
(ii) commercial banks, and
(iii) the government.
✓ In India, RBI is the principal supplier of money. RBI issues currency on the basis of
Minimum Reserve System.
✓ Commercial banks are the second significant source of money supply. Unlike the
central bank, commercial banks do not have the authority of issuing currency. The
commercial banks cannot issue notes and coins.
