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MBF-Topic 3-Evolution of Money

MBF-Topic 3-Evolution of Money

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Published by: Sylentsage on Apr 12, 2012
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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 1. 4. COMMODITY MONEY METALIC MONEY PAPER MONEY CREDIT MONEY ELECTRONIC MONEY . 5. 3. 2.

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

4. Barter System had different problem like: Storing Problem Durability problem Transportation problem Divisibility problem .1. 3. COMMODITY MONEY  1. 2.

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

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

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

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

3. PAPER MONEY .

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

usually the Central bank.  Paper Money can be: 1. 2.3. 3. . Fait Paper Money. PAPER MONEY PAPER MONEY  Refers to the Notes issued by the State or by the Bank. Convertible Paper Money. Representative Paper Money.

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

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

5. ELECTRONIC MONEY .

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

CHARACTERISTICS OF MONEY .

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

Unlimited Legal Tender. Limited Legal Tender. 2. . “ Means of payment.LEGAL TENDER. 1. which has state’s sanction behind it and can be used to settlement of Debt obligations”  Debtor can compel creditor to accept it.

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

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

M3:  M2+ Long term investments. .  Assets which are important to large institution and not to individuals.MEASURING MONEY M1:  Currency and checkable Deposit Accounts and other bank money instruments.  Small denomination Time deposit etc.  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.

MEASURING MONEY .

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