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1. MONEY

2. MONEY
• Money is defined as anything that acts as a
medium of exchange
• Function of money:
3.medium of exchange
4.measure of value / unit of account
5.store of value
6.standard deffered payment

3. Types of Money
• commodity money
• fiat money
• legal tender
• token money
• demand deposit

4. Money supply
• M1 = narrow money = is also a money
transaction in which the money is directly used
for transactions.
currency - coins + paper money ( fiat money)
checkable deposits = demand deposit by
commercial bank.
M1 = currency + demand deposit

5. M2 = near money = items that are highly
liquid financial assets such as a saving
account, fixed deposits, negotiable
certificates by Bank Negara or
commercial banks.
Near monies also known as quasi money
M2 = M1 + saving and fixed deposits in
commercial banks + NCD + repos +
Bank Negara Certificates.

6. • M3= Broad money, which is the broadest
in definition.
• M3 = M2 + fixed and saving deposit in
other financial institutions.
• Other financial institutions = includes are
merchant banks, Bank Islam Malaysia
Bhd, Finance companies and Discount
Houses.
• Broad near money(quasi money) = M3-
M1

7. Money Demand (Md)
• Keynes Theory:
2. Transaction Motives
3. Precautionary Motives
4. Speculative Motive

8. Quantity Theory Of Money
• By Irvin Fisher: the quantity theory of
money provides that the changes in
money are related to changes in the
price level, which is measured by the
consumer price index (CPI)
• MV = PT
• M= money circulation
• V= velocity
• P= price level
• T= total transaction

9. BANKING SYSTEM
• CLASSIFICATION OF BANKS
2. Banking institutions
3. Non-bank financial institutions
4. Non-bank financial intermediaries

10. BANKING INSTITUTIONS
2. Central Bank
3. Commercial Banks
OTHER FINANCIAL INSTITUTIONS
1. Finance companies
2. Merchant Bank
3. EPF

11. COMMERCIAL BANK
FUNCTIONS :
1. Accepting deposits
2. Providing Loans and advances
3. Providing other banking services and facilities

12. CENTRAL BANK
FUNCTIONS:
1. Issuing currencies
2. To act as a banker to the government
3. Banker to other banks
4. To promote monetary stability and financial
structure
5. Be a holder of the country of gold and foreign
currency reserves.