MANAGERIAL ECONOMICS – MONEY AND MONETARY POLICY

MEANING AND USE

It has been a common understanding that the more money one has , the
more that person can buy and use a certain product.

MONEY - is an item that is used by buyers to purchase goods and services.

Hence, it becomes the reason why sellers sell , to make money. After all ,
people engage in business primarily because of earnings .

As a tool of the economy, money has three functions ;

1. MEDIUM OF EXCHANGE – As a medium of exchange , money

facilitates the transfer of product from one person to another When
you go to the grocery and buy your toiletries , you do not pay using a
piece of gold or bag of fruit . You pay using your money.
2. UNIT OF ACCOUNT – Money is a unit of account becomes that
measure that people use to buy the goods that they want. If
centimeters are to length , and kilograms are to weight , then the
amount of money is to purchases.
3. STORE OF VALUE – Money just stores the value and does not change.
Thus money stores the value that it carries . Whatever number is
imprinted in that bill or minted on that coin stays there.

IMPORTANCE OF MONEY

There are several realities that relate money and monetary policy to the
economy

1. stable value of money is essential to trade

2. healthy banks are important for savers, investors, borrowers and the
public
3. market play a vital role in the function of our monetary system
4. a well designed and well executed monetary policy is essential for an
economy to keep its resources fully employed

BANKS – are institutions that serve as intermediary between savers and

the borrowers. They are the links of the people who save and the people
who borrow .
CONCEPT OF BANKING

Banks are given the power by the government to conduct different

functions under its jurisdiction. The most basic of which are to accept
deposits from people who save , and to lend money to parties that need
funding. Depositors or savers place their money in banks for the purpose
of 1. earning interest

2. security from lost

3. storage

Aside from deposit taking and lending , other functions of banks include

1. treasury operations
2. borrowing banks
3. trust operations
4. private banking
5. Foreign currency denomination unit FCDU operations
6. international banking
7. brokerage – real estate brokers assist in the purchase and sale of
real estate properties
8. investment banking – when a business may need money to increase
its working capital , banks may lend help by distributing the company
bonds on behalf of the client company

TYPES OF BANKS

7 MAJOR TYPES OF BANKS

1. Universal banks – biggest banks in terms of asset size

2. Commercial banks
3. Thrift banks
4. Rural banks
5. Cooperative banks
6. Islamic banks – among all these type of bank Islamic bank has a
different because their loans do not have interest .
7. Digital banks – on line banks
CENTRAL BANKING IN THE PHILIPPINES

To ensure the adequate protection of the public , especially the depositors

and borrowers , the government established the Bangko sentral ng
Pilipinas . BSP has been given independence and power to govern all banks
and non bank financial institutions to maintain monetary stability in the
country. It was mandated by the Philippine government with different
roles . The BSP is the supervisor of all banks . The BSP is also the issuer of
money . It has the exclusive authority to issue the national currency . As
the custodian of the country’s official reserves.
ACTIVITY

ANSWER THE FOLLOWING

TRUE OR FALSE

1. The concept of money creation means that money is printed to create

more of its copies.
2. FCDU means foreign currency dollar unit
3. Trust funds are insured up to 500,000 per account holder
4. Underwriting is not allowed for commercial banks
5. As a lender of last resort, a Filipino may borrow directly from the BSP
during emergencies
6. As a function of bank borrowings and credit are synonymous
7. Commercial banks are also known as Islamic banks
8. Brokerage is when bank engages in treasury operations for its clients
9. Financial intermediation process is when the bank serves as the
bridge between the depositors and borrowers
10. All money deposited to banks may be lent to the borrowing
public.