MACROECONOMICS CLASS 12

MACRO ECONOMICS
It Is That Branch of Economics Which Studies the Aggregates of
An Economy or The Larger Units of An Economy.
The Main Objective of Macroeconomic
Is the Study of 'How the Income & Employment of An Economy
Is Determined?' This Branch of Economics Deals with The Fuller
Utilization of Resources.

MONEY AND BANKING

Barter System:
Barter Exchange refers to exchange of goods
for goods. An economy, where there is a direct
barter of goods and services, is called a “barter
economy” or “c-c economy.
Limitations of Barter Exchange:
• Lack of Double Coincidence of wants.
• Lack of common measure of value.
• Lack of standard of deferred Payment.
• Lack of store of value.

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MACROECONOMICS CLASS 12

MONEY:
Money Is Anything That Has the General Acceptability as A Common
Medium of Exchange & As A Common Measure of The Value of The
Commodities.

FUNCTION OF MONEY:

1.Primary – Medium of Exchange, Common Measurement.

2.Secondary – Standard of deferred payments, store of value.

Money has overcome the drawbacks of barter

system
• Medium of Exchange
• Measure of value
• Store of value
• Standard of deferred payments

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MACROECONOMICS CLASS 12

MONEY SUPPLY:
It Refers to The Total Stock of Money in An Economy at Any Point of
Time, Held by The General Public. M = C + Dd

COMMERCIAL BANK:
A Commercial Bank Is A Financial Institution Which Performs the
Function of Accepting Deposits from The Public & Advancing Loans.
Functions of a Commercial Bank
1. Primary Function
• Accepting Deposits
➢ Current Account Deposits or Demand Deposit
➢ Fixed Deposit and time Deposits
➢ Saving Deposit
• Advancing of Loans
➢ Cash Credit
➢ Demand Loan
➢ Short Term loans
2. Secondary Function
• Overdraft facility
• Discounting bolls of exchange
• Agency Functions
➢ Transfers of funds
➢ Collection and payments of various items
➢ Purchase and sale of foreign exchange
➢ Purchase and sale of securities
➢ Income tax consultancy
➢ Trustee and executor
➢ Letters of reference

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MACROECONOMICS CLASS 12

• General Utility Functions

➢ Locker Facility
➢ Traveler’s Cheque
➢ Letter of credit
➢ Underwritten Securities
➢ Collection of Statistics
Money Creation or Credit Creation:

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MACROECONOMICS CLASS 12

Central Bank:
Central Bank is an ‘apex’ body of controls,
operates, regulates and directs the entire
banking and monetary structure of the country.
Functions of Central Bank
• Currency Authority
• Banker to the government
• Banker’s Bank and Supervisor
• Controller of Money Supply and Credit
• Custodian of Foreign Exchange Reserve
Controller of Money Supply and Credit
LEGAL RESERVE RATIO
It Refers to The Minimum Portion of Total Net Demand & Time Deposits
of Commercial Banks Which Have to Be Maintained with Central Bank &
Themselves as Cash Liquid Assets

• CASH LIQUIDITY RATIO:

It Refers to That Minimum Portion of Total Net Deposits of
Commercial Banks Which Have to Be Maintained with Central
Bank.

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MACROECONOMICS CLASS 12

• STATUTORY LIQUIDITY RATIO:

It Refers to That Portion of Total Deposits Which Have to Be
Maintained by The Banks Themselves in The Form of Liquid Cash
Assets Against the Securities of Govt. & RBI.

REPO RATE:
Repo Rate refers To the Interest Paid By The Commercial Banks To RBI
Against The Loans & Advances Taken By Them From RBI To Meet The
Short Term Needs.

Bank Rate
Bank Rate is the rate at which the central bank
of a country (RBI in case of India) lends money
to commercial banks to meet their long-term
needs.

REVERSE REPO RATE:

Refers to The Interest Received by The Commercial Banks from The
Central Banks Against the Parking of Funds by The Commercial Banks.

CREDIT MULTIPLIER:
Refers to The Amount by Which the Initial Deposit Multiplies Into A
Larger Amount Of Final Deposits.

DEPOSITES:
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MACROECONOMICS CLASS 12

1.Demand
2. Term (time)

A. Current Account:
DEPOSITE and withdrawal many times. Suitable for business man.

B) Saving Account Deposits:

Banks pays interest. Limits on deposit and withdraw for the purpose of
savings. Suitable for students, housewife, and salary holder.

C) Fixed or Time Deposits:

Refers to The Deposits Which Are Accepted for The Specified Period &
Which Are Not Payable on Demand Before the Expiry of The Period. The
Bank Pay Relatively High Rate of Interest on This Deposit.

FUNCTIONS OF CENTRAL BANK (RBI):

1.It Has the Monopoly of Issuing Currency Notes.
2.It Act as A Banker of The Govt.
3.It Acts as A Banker's Bank.
4.It Acts as A Custodian of Gold Reserves.
5.It Acts as A Controller of Credit.
6.It Promote the Economic Growth & Development.

Atul Kumar: 9650239757

MACROECONOMICS CLASS 12

Atul Kumar: 9650239757