GESSILLE MAY S.

SALAVARIA

MONEY
To economists, the word money has a different meaning from income or

wealth. Money is anything that is generally accepted as payment for goods or

services or in the repayment of debts. Money serves three primary functions: as a

medium of exchange, as a unit of account, and as a store of value.

Money as a medium of exchange avoids the problem of double coincidence of

wants that arises in a barter economy by lowering transaction costs and

encouraging specialization and the division of labor. Money as a unit of account

reduces the number of prices needed in the economy, which also reduces

transaction costs. Money also functions as a store of value, but performs this role

poorly if it is rapidly losing value due to inflation.

The payments system has evolved over time. Until several hundred years ago,

the payments system in all but the most primitive societies was based primarily on

precious metals. The introduction of paper currency lowered the cost of

transporting money. The next major advance was the introduction of checks, which

lowered transaction costs still further. We are currently moving toward an

electronic payments system in which paper is eliminated and all transactions are

handled by computers. Despite the potential efficiency of such a system, obstacles

are slowing the movement to the checkless society and the development of new

forms of electronic money.

The Federal Reserve System has defined three different measures of the

money supply—M1, M2, and M3. These measures are not equivalent and do not
always move together, so they cannot be used interchangeably by policymakers.

Obtaining the precise, correct measure of money does seem to matter and has

implications for the conduct of monetary policy.

Another problem in the measurement of money is that the data are not

always as accurate as we would like. Substantial revisions in the data do occur; they

indicate that initially released money data are not a reliable guide to short-run

(say, month-to-month) movements in the money supply, although they are more

reliable over longer periods of time, such as a year.

REFLECTION:

Money has been called many things. It has been said to be the root of all evil.Money

is flashy. It draws us in with its pretty images and how the media portrays it as something

wonderful.Money is harmless on its own. Without its context and use, it would be nothing

more than meaningless material. In other words, by giving it meaning and striving to grab

more of it based on this significance without regard to other people, we incur evil. Knowing

we are blessed is not about what somebody says or what happens in the world. It’s not

about how much money is in the bank.

What matters most is our attitude towards money. If we have an attitude that the

money we have is limited, meaning we don’t perceive that there’s a source of supply for

additional money, then we can look at money as something that we have to hang onto and

watch very carefully. We can create a sense of desperation such that people do

desperate things to get it, such as lie, cheat, steal, or even kill in order to have it. Those

types of actions are based on a deep sense of lack or a threat that our survival is based on

that medium of exchange.

Hebrews 13:5 “Keep your life free from love of money, and be content with what

you have, for he has said, “I will never leave you nor forsake you.”
 CREDIT

With the introduction and use of money credit also came into existence.

Credit is created when one party (a person, a firm or an institution) lends money to

another party, the borrower. Thus, credit is generally understood to mean the

finance provided to others at a certain rate of interest.

The main function of credit is to relieve the constraint imposed by balanced

budgets on economic agents, that is, to meet the financial requirements of

investors who have to spend more on trade and investment than their own savings.

If credit is not efficiently managed, it can cause inflation or deflation,

recession and unemployment in the economy. Besides, the mismanagement of credit

can lead to misallocation of investible resources and thereby hinder economic

growth.

Credit is required for different purposes and by all sectors of the economy.

Therefore, there is need for the proper allocation of credit between different

uses and sectors if the society is to achieve its objectives. When credit is

demanded and used for productive purposes, it may be used to finance the needs

of working capital or for fixed investment example is capital equipment, machinery

etc

5 C’s of or characteristics of Credit: (a) Capacity, (b) Capital, (c) Collateral,

(d) Conditions, and (e ) Character. These are a framework used by many tarditional

lenders to evaluate potential small-business borrowers.

The broad categories of economic activity for which credit for productive

purposes is demanded are: (a) Agriculture, (b) Industry, (c) Construction, and (d)
Trade, both domestic and foreign.

Credit is a means of lending. People often need money to start a business or

pay for college fees and other such huge expenses, which may not be possible to

meet in cash and in one go. For such situations there are credits. In credit, you

borrow money from the bank to meet your expenses, whether to pay off a college

fee, or to pay the vendors for any business supply, or to purchase a new house, or

car.

Basically, anything that requires a huge sum of money. Thus, credit is an

important part of monetary circulation in the market. It is this money that

generates more money for the bank, which bank can again put into circulation,

thereby raising the GDP of the country.

REFLECTION:

Credit is based on confidence in debtor’s ability to make payment at some future

time. I have learned that it’s okay to borrow money to someone but we must remember

that we should also know and always remember that we should pay it back after and not to

run away with it because it is our obligation and you can’t run away or hide on your

obligations. We should be responsible with our obligations . And as a lender they should not

take high intersest to the borrower because it is usury already and also it is against God.

Leviticus 25:36” Take thou no usury of him, or increase: but fear thy God, that thy

brother may live with thee.”

BANKING
 Banking is an indusrty that handles cash,credit, and other financial

transactions. Banking begins with the first prototype banks of merchants wich

made grain loans to farmers and traders who carried goods betwween cities.

Generally, banks determine interest rates and other conditions for their

deposits with a view to achieving the highest possible return, taking into account

the associated risks. Ultimately, the private sector’s demand for money is

determined by the current monetary policy. The reason is that monetary policy

determines the level of interest rates, which has a direct impact on the costs of

raising a loan. Monetary policy also influences. Banks and other financial

institutions are what make financial markets work. Structure of the financial

system – private sector financial institutions, insurance companies, mutual funds,

investment banks – lend to a company through financial intermediaries: institutions

that borrow funds from people who have saved and in turn make loans to others.

Banks a financial institution that accept deposits and make loans – commercial

banks, savings associations, mutual savings banks.

REFLECTION:

Banks play a major role in successfully managing one’s money. I have learned that i will have

to take more responsibility and learn how to manage my money. Throughout this Unit, I

have learned heaps of knowledge on how to do exactly that, and most of it wouldn’t be

possible without a bank. The function of a bank is to gather all the savings and loan them

to people who need them for businesses, house mortgages, etc at an interest rate. A bank
is a place where I can safely store my financial assets, gain gradual interest from the bank

annually, and look to borrow loans or leases if I am ever in need. To invest your life

successfully, deposit it with Christ and Guard His deposit with you.

Matthew 25:27” Well then, you should have put my money on deposit with the bankers, so

that wehen I return I would have received it back with interest.”