MONEY

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MONEY BANKING

• Chapter 2

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MONEY AND ITS FUNCTIONS
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Money and its functions

• Money is anything that is generally acceptable in
  payment for goods and services or in the
  repayment of debts.
• It is also defined as anything that is regularly
  used in economic transactions of exchanges.

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FUNCTIONS OF MONEY

• MONEY AS A MEDIUM OF EXCHANGE
• In all transactions money is used to for goods
  and services.
• Sale or purchase of goods is done through money.
• Money has made the exchange of goods easy.
• The time spent in exchange of goods with the use
  of money has been considerably reduced.

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2. MONEY AS UNIT OF ACCOUNT

• Another important role of money is that it serves
  as a common measure of value.
• The value of goods and services can be expressed
  in terms of units of money.
• Money is the yardstick that allows the
  individuals to measure the relative value of
  goods and services.
• For example, a car may be listed for sale at
  10000, a house for 20000 etc.

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3. MONEY AS A STANDARD OF DEFERRED PAYMENTS

• In the modern world, business is mostly conducted
  on the basis of credit.
• Money is the only unit of account which is easy
  to borrow and easy to lend.
• The function of money as standard of deferred
  payments is better served if the value of money
  more or less remains stable.

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4. Money as a store of value

• Money also functions as a store of value.
• It represents purchasing power overtime.
• Since money is the most liquid of all assets,
  therefore it is easier to store value in the form
  of money.
• In the barter economy when goods were used as
  money there were problems in storing wealth in
  the form of cattle, grains etc.
• Money has removed this difficulty to store
  wealth.

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QUALITIES OF GOOD MONEY

• General Acceptability
• Stability of Value
• Transportability
• Storability
• Divisibility
• Malleability