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1. Money
(Macro-economics)

2. Money
Definition
• Amedium of exchange.
• With the help of money any exchange of goods and
services can take place.
• Money is said to be the most liquid asset among all
the assets of a man.
• It has general acceptability as a means of payment
and liquid characteristic. Keynes called this
Liquidity preference.

3. Money

4. Money
• Generally money is created by the Central Bank
or the Government of a country.
• These are legal tender money as there is legal
compulsion for their acceptance.
• They also called as Cash Money.
• Another considerable flow of money is Credit
Money—created by the commercial banks by their
loan transactions

5. Cash Money Vs Credit Money

6. Money
• Money is regarded any object which is generally
accepted as:
• medium of exchange
• unit of account i.e. common measure of value
• standard of deferred payment
• store of value
• transfer of value.

7. Money

8. Functions Of Money

9. Money

10. Primary Functions
• As medium of exchange, money is used as a means
of payment.
• As money has ready purchasing power, it facilitates
in transacting exchange of goods and services with
minimum effort and time.

11. Primary Functions
• As unit of account, money is treated as common
measure of value.
• value of all goods and services in exchange can be
expressed in terms of money.
• Such expression gives rise to price system in which
money act as a means of calculating the relative
prices as absolute prices of goods and services.

12. Unit Of Account

13. Secondary Functions
• As standard of deferred payment, money
can be used in the settlement of debt and future
payments.
• Loans are advanced and future contracts
are settled in terms of money.

14. Secondary Functions
• As store of value, money is hold as an asset in
liquid (or cash balance) to use anytime in future.
• This is because money has purchasing power
which holds commands over goods and services
all time – at present and in future.
• However use of money as store of value is not
without drawbacks. Changes in general price
level causes rise and fall in the value of money.
When price level rises, value of money falls and
vice versa.

15. As Store of Value

16. Secondary Functions
• As transfer of value, sale and purchase of
movable and immovable assets, paper wealth
and physical wealth can be made with the help
of money.
• Thus, value available in the form of asset
can be transferred from one person to
another with the use of money.

17. As Transfer of Value

18. Value Of Money
• It means Exchange Value.
• It implies how much of goods and services can
be obtained in-exchange of a unit of money.
• Value of money is inverse of price.
• When price level increases, the value of money
decrease and vice versa.

19. Exchange Value

20. Forms of Money
• The total money supply of a country can
broadly be classified into two groups —
• Cash Money and Credit Money.
• It also includes all other financial assets.
• The degree of moniness varies widely from
asset to asset.

21. Cash Money and Credit Money

22. The Components of Money Supply

23. Forms of Money
• In modern monetary transactions, the total
stock of money or money supply includes
the following:
• Metallic money or currency coins
• Standard or Full-bodied Coins.
• Token coins
• Paper Money Or Paper Currency
• Credit Or Bank Money

24. Paper Money & Currency Coins

25. Metallic Money Or Currency Coins
• It refers to the coins made out of metal like
gold, bronze, silver, copper, nickel.
• Standard or Full-bodied Coins are those coins
whose face value is equal to its intrinsic
(metallic) value.
• Token coins have intrinsic (metallic) value less
than its face value.
• They generally are of lower denominations are
made of cheap metals like nickel and copper.
• Token coins are used for exchange of small value.

26. Metallic Money Or Currency Coins

27. Standard or Full-bodied Coins.

28. Paper Money Or Paper Currency
• Paper money consists of currency notes
issued by the State Treasury or the Central
bank of the country.

29. Paper Money Or Paper Currency

30. Credit Or Bank Money
• Bank demand deposits withdraw-able by
issuing cheque has started functioning as
money, and cheque are conventionally
accepted as a means of payment by the
business community in general.

31. Credit Or Bank Money

32. Forms of Money
• In short, anything and everything that has
served as money is generally recognized and
accepted as means of payments. But all can
serve a good money.
• Good money should poses the attributes of
general acceptability, cognizability (capable
of being known), portability, divisibility,
durability, uniformity, adequacy and
stability of value.

33. Good Money Vs Bad Money

34. Legal Tender And Conventional Money
• In modern era, currency money and bank
money together constitute the total stock of
money or money supply.
• Currency money (both currency coins and
currency notes) is legal tender money or fiat
• money and has general acceptability.
• Credit money or bank demand deposits are
conventional money and lacks general
acceptability.

35. Legal Tender And Conventional Money

36. Money Supply
• The total stock of money circulating in an
economy is the money supply.
• The circulating money involves the currency,
printed notes, money in the deposit accounts
and in The form of other liquid assets.
• Monetary policy of a country is concerned with
the supply of money.
• Narrow money supply is called M1 It consists
of notes and coins in circulation and demand
deposits with banks and central bank.

37. Money Supply

38. Money Supply
• As they are quickly and easily used for
transactions, they are called transactions
money.
• Broad money supply, M2, consists of M1 Plus
other deposits (savings deposits, time deposits,
etc.).
• There are some differences in the definitions of
money supply from country to country.
• To give the best definition of money supply, we
like to refer the money supply as currency held by
The public, plus deposits.

39. Money Supply

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