Barter system Commodity Money Metallic age Paper money Barter system
In barter age there was no money. The trade used
to take place without any money. Goods were exchange for goods. And there was a problem of coincidence of wants. “Barter is the direct exchanged of commodity or service for another without the money”. As the society developed people found that thy need some commodities more than others and their wants are of varying importance. This increased the importance of some commodities and goods. Gradually these commodities attained the status of money in that era. People used to value these higher than others. So we can say that different goods or commodities became money in that era. Metallic Age Man found gold, silver and other precious metals. Paper Money The people were in the habit of keeping these gold coins, and bars with goldsmiths. The receipts issued by goldsmiths become medium of exchange over time. INCONVENIENCE OF BARTER No Measure of Value No store of Value No investment/ savings Tax collection Difficulties in transfer of wealth Double coincidence of wants. Comparison of Living Standard No capital Formation How use of money overcome inconveniences of Barter Medium of Exchange Store of value Price Mechanism Credit and Advances Banking institutions Investment and Savings Public Finance/ Government Revenues Foreign investment Other Forms of Money a) Black Money: Black money is one which has been gathered through illegal means. b) White money: White money is one which has been earned through legal and legitimate means. c) Cheap Money: Cheap money is one whose cost of borrowing is less than the standard rate of interest. MONEY MARKET
Meaning of Money Market:
Money market refers to the market where money and highly liquid marketable securities are bought and sold having a maturity period of one or less than one year. It is not a place like the stock market but an activity conducted by telephone. The money market constitutes a very important segment of the Indian financial system. The highly liquid marketable securities are also called as ‘ money market instruments' like: treasury bills, government securities, commercial paper, certificates of deposit, call money, repurchase agreements etc. How important money? I said To Money: u r Just a Piece Of Paper, Money Smiled And Said: "Of course I Am a Piece Of Paper, But I Haven't Seen a Dustbin Yet In My Life" Importance 1. Money being the life blood of a modern economy, its circular flow gives a clear picture of the economy. 2. We can know from its study whether the economy is working smoothly or there is any disturbance in its smooth functioning. 3. The circulation of money is immense significance for studying the functioning of the economy and for helping the government in formulating policy measures. . Other Importance of Money in Modern Economy 1. Basis of Market Mechanism 2. Motivation to economic activities 3. Helpful in capital formation 4. Removal of defects of barter system 5. Helpful in international payments 6. Fulfillment of deficit budgeting 7. Social Importance of money 8. Political Importance of Money 9. Indicator of Economic Welfare 10. Financial assistance to international financial institutions 11. Index of Individual progress 12. Basis of investment system 13. Helpful in transfer of wealth What’s more importance than money?