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  • FINMAN1 Concept of Money

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    Galvez, Anya Faith Q.
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    The document defines money as any good widely used and accepted in transactions, such as coins, currency, checks, securities, and similar instruments where title passes via endorsement, assignment or delivery. It discusses the history of money evolving from barter systems and commodity money to modern fiat currency backed by central banks. Money serves primary functions as a medium of exchange and measure of value, along with secondary roles as a standard for deferred payments, store of value, and means to transfer value. Inflation results from increases in the money supply outpacing economic growth, as described by the quantity theory of money, and can lead to hyperinflation or stagflation in extreme cases.

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    The document defines money as any good widely used and accepted in transactions, such as coins, currency, checks, securities, and similar instruments where title passes via endorsement, assignment or delivery. It discusses the history of money evolving from barter systems and commodity money to modern fiat currency backed by central banks. Money serves primary functions as a medium of exchange and measure of value, along with secondary roles as a standard for deferred payments, store of value, and means to transfer value. Inflation results from increases in the money supply outpacing economic growth, as described by the quantity theory of money, and can lead to hyperinflation or stagflation in extreme cases.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    9 views11 pages

    FINMAN1 Concept of Money

    Uploaded by

    Galvez, Anya Faith Q.
    The document defines money as any good widely used and accepted in transactions, such as coins, currency, checks, securities, and similar instruments where title passes via endorsement, assignment or delivery. It discusses the history of money evolving from barter systems and commodity money to modern fiat currency backed by central banks. Money serves primary functions as a medium of exchange and measure of value, along with secondary roles as a standard for deferred payments, store of value, and means to transfer value. Inflation results from increases in the money supply outpacing economic growth, as described by the quantity theory of money, and can lead to hyperinflation or stagflation in extreme cases.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 11

    11/09/2022

    Concept of
    Money
    FINMAN1

    CONTENTS
    Definition of Money

    History of Money

    Functions of Money

    Money and Inflation

    Exchange Rates

    1
    11/09/2022

    Definition of Money

    What is money?

    2
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    What is money?
    REPUBLIC ACT NO. 9160
    (c) “Monetary instrument” refers to:
    (1) coins or currency of legal tender of the Philippines, or of any other country;
    (2) drafts, checks and notes;
    (3) securities or negotiable instruments, bonds, commercial papers, deposit certificates, trust
    certificates, custodial receipts or deposit substitute instruments, trading orders, transaction
    tickets and confirmations of sale or investments and money market instruments; and
    (4) other similar instruments where title thereto passes to another by endorsement, assignment
    or delivery.

    What is money?
    REPUBLIC ACT NO. 265

    Sec. 51. Definition of currency. — The word "currency" is hereby defined, for the purposes of this
    Act, as meaning all Philippine notes and coins issued or circulating in accordance with the
    provisions of this Act.

    3
    11/09/2022

    What is money?
    oMoney is any good that is widely used and accepted in transactions involving the transfer of
    goods and services from one person to another.

    oMoney, a commodity accepted by general consent as a medium of economic exchange.

    History of Money

    4
    11/09/2022

    I hope you watched the videos………

    History of Money
    1. Trade (Barter)

    2. Early forms of money (rocks, cowrie shells, cattle)

    3. Commodity Money

    4. IOUs (I owe you)

    5. Gold Standard

    6. Fiat Money

    10

    5
    11/09/2022

    History of Money
    Fractional Reserve Banking

    Fractional reserve banking is a system in which only a fraction of bank deposits are backed by
    actual cash on hand and available for withdrawal. This is done to theoretically expand the
    economy by freeing capital for lending.

    11

    Functions of Money

    12

    6
    11/09/2022

    Functions of Money
    Primary Functions of Money

    1. Medium of Exchange

    2. Measure of Value

    13

    Functions of Money
    Secondary Functions of Money

    1. Standard of deferred payments

    2. Store of Value

    3. Transfer of Value

    14

    7
    11/09/2022

    Functions of Money
    Basis of credit.

    oDistribution of Social income.

    oLiquidation of wealth.

    oBasis of Equalizing Marginal Utility and Marginal Productivity

    15

    Money and Inflation

    16

    8
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    Demand for Money


    Reasons to hold money:

    1. Transaction Motive

    2. Precautionary Motive

    3. Speculative Motive

    4. Compensation Motive***

    17

    Supply of Money
    History of Money

    Central Banking

    18

    9
    11/09/2022

    Quantity Theory of Money


    𝑀×𝑉 =𝑃×𝑌

    M = Supply of Money

    V = Velocity of Money

    P = Average Price of Finished Goods

    Y = Finished Goods Sold in the Economy

    M*V/ P*Y = Nominal GDP

    19

    Money and Inflation


    ×
    =𝑃

    V and Y is relatively stable overtime. It can be inferred that the primary mover of process is the
    supply of money. However, V and Y may also move drastically and affect price over time.

    20

    10
    11/09/2022

    Concepts in Inflation
    Hyperinflation – process increase at such speed that the value of money erodes drastically. You
    may also refer to PAS 29 for Accounting in Hyperinflationary Economies for standards that defines
    hyperinflation.

    Stagflation – a situation when stagnation and inflation coexist.

    Deflation – just the opposite of inflation

    21

    11

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