CLASS 12 PPT ON MAONEY AND BANKING MADE BY AMITESH YADAV

2. Money
 Money is anything that is
generally acceptable as a means of
exchange and at the same time, act
as a store of value.

3. Money
Legal Definition :- Money is anything
declared by law as money
Functional Definition :- Money is
anything that acts as a medium of
exchange, measure of value, store of
value and standard for deferred
payments

4. Classification Of Money
 Full bodied money
 Representative full bodied money
Credit money

5. Barter System
 Barter System means the direct
exchange of one commodity to
another.

6. Barter Economy
 Barter economy can be termed as
C-C economy i.e., Commodity for
Commodity economy.

7. Difficulties of Barter System
 Lack of Double Coincidence
 Lack of divisibility
 Lack of Common measure
 Difficulty of Storage and Transfer of
Wealth
 Difficulty in deferred payment
 Difficulty in the exchange of services

8. Why we need money?
 Robinson-Crusoe Economy: autarky,
do not need money
 Robinson + Friday: need exchange,
barter economy
 Barter economy has a drawback:
“double coincidence of wants”

9. Why we need money?
 Introduce money  greases the wheel
of exchange and make the whole
economy more productive
 With money, market does not need to
be “personal,” the extent of exchange is
greatly increased

10. The Functions of Money
 Money
 Medium of exchange
 Standard object - exchange goods &
services
 Unit of account
 Standard unit – quoting prices
 Store of value
 Store wealth

11. What serves as money?
 For a money, we need it
 Divisible
 Identical (uniform)
 Storable and durable
 Compact (easy to carry): high value per
unit of volume or weight
 Candidate: gold, silver, copper, …

12. What serves as money?
 Chinese coin

13. What serves as money?
 Paper is even better…
 First paper money, 11th century
in China
 Bank notes carried a guarantee that
it could be traded at any time
for coin age

14. What serves as money?
 Decreed as money by government
 Little value as commodity
 Maintains value - medium of exchange
because people have faith that the issuer
will stand behind it

15. Fiat Money
It refers to money by order
/authority of the government. It
includes Notes And Coins.

16. Fiduciary Money
 It refers to money backed up by
trust between the payer and payee.

17. Money Supplier
 In the Modern times the source of
supply of money are government,
central bank of the country and
commercial bank.

18.  It Includes currency (R) with the public
and cash(c) reserves with bank. High
Powered money=R+C.
High Powered Money

19. How Quantity of Money is
Measured
 Asset’s liquidity
 Ease – convert into cash
 Credit cards
 Not included in money supply
 Convention: Money only includes
 Coins
 Paper money
 Checkable deposits

20. Banking
 Banking implies accepting deposits of
money from the public for the purpose
of lending or investment which is
repayable on demand and can be
withdrawn by means of cheques, draft
order etc.

21. Commercial Bank
 A Commercial Bank is a financial
institution engaged in the business of
accepting deposits and making loans to
the people.

22. Central Bank
 A Central Bank is an apex institution
of a country that controls and
regulates the monetary and financial
system of the country.

23. Functions of Commercial bank
 Acceptance of deposits from the public
 Advancing of loans
 Investment Of Funds
 Agency Function
 Remittance of funds
 Collection and payment of fund
 Sale and purchase of security
 Representation and correspondence
 Trusteeship
 General utility functions
 Credit creation

24. Factors affecting Credit Creation
Primary cash deposits
Cash reserve ratio
Banking habits of the people
Policy of the Central

25. Functions Of Central banks(RBI)
 Bank Of issue
 Banker, agent and advisor to the
government
 Custodian of nation’s reserves of
international currency
 Lender of the last resort
 Bank of central clearance
 Controller of money supply and credit

26. Instruments of Monetary
Policy or Credit Control
Measures
Quantitative Instruments
Bank rate
Open market operation
Cash Reserve Ratio (CRR)
Statutory Liquidity Ratio (SLR)

27. Instruments of Monetary
Policy or Credit Control
Measures
Qualitative Instruments
Margin requirements
Rationing of credit
Direct action
Moral suasion

28. Cash Reserve Ratio(CRR)
 It refers to the minimum
percentage of a bank’s total
deposits required to be kept with
the Central Bank.

29. Statutory Liquidity Ratio(SLR)
 Every Bank is required to maintain
a fixed percentage of its assets in
the form of cash Or Other Liquid
assets.