a detailed presentation on economics and functions of money

1. "It doesn't matter if you're black
or white... the only color that
really matters is green."
- Family Guy
Issued By:
The Ministry of Finance:
Section: IV
Clauses: 491 to 500

2. TYPES OF MONEY
Commodit
y Money
Metallic
Money Paper
Money
Bank
Credit
Electronic
Money
Representative
money
Convertible
Inconvertible
“You cant buy happiness but you can buy icecream and that’s kind of the same thing.”

3. MONEY CAN ALSO BE CLASSIFIED AS:
Hard
Money
Soft
Money
No
Money
-Noble metals
-Real universal value
-Gold, silver, platinum
-Paper money backed
by hard money
-Silver or gold
certificates
-Backed by nothing
of value
-Fiat money
-Currency
"Finance is the art of passing money from hand to hand until it finally disappears."

4. PAPER MONEY: Representative and Convertible
Points Representative Convertible
1. Backed by gold
and silver reserves?
Fully Partially (by gold
reserves and by
securities
2. Fear of over- issue No Yes
3. Public Confidence Yes Yes (but not so much
as representative)
4. Elasticity Not elastic Flexible
5. Value of metallic
reserves
Equal to the value of
the notes issued
Less than the value of
the notes issued

5. INCONVERTIBLE MONEY: FIAT MONEY
Not convertible into
standard coins or
valuable metals
Elastic
according to the
needs of the
economy
Risk of over issue
and inflation
less public
confidence
Backed neither by
the metallic nor the
fiduciary reserves.
Unlimited
legal tender
“Inflation is when you pay fifteen dollars for the ten-dollar haircut you
used to get for five dollars when you had hair.”—Sam Ewing

6. CURRENCY OR MONEY?
Are these two the same? Can you notice the difference?

7. Let’s get to the bottom of the rupee!
• Notes in circulation: 8,420,409,791,000
• Worth of gold against it: 485,772,152,000
• % of rupee backed by gold:
= 485,772,152,000 X 100
8,420,409,791,000
= 5.76% (6% approx)
• 94% of the currency backing is foreign
securities.
• Indian rupee – Convertible paper money
"The mint makes it first, it is up to you to make it last.”

8. BANK MONEY AND ELECTRONIC MONEY
• Funds held in demand deposit accounts in
commercial banks.
• Form the greater part of the money supply of
a country.
• Can be used, via cheques and drafts, as a
means of payment
Electronic Money
- Digital equivalent of
cash
- Stored on an electronic
device or remotely
at a server
- Credit card/debit card
different from e-money
- A smartcard stores
bank account
information and
holds digital cash.
“A bank is a place where they lend you an umbrella in fair weather and ask for it back when it rains.”

9. FUNCTIONS OF MONEY
Medium of
exchange
Store of
value
Unit of
account
Standard of
deferred
payments
Encourage
s division
of labour
Transforms
savings into
investments
Directs
Economic
Trends
"There are so many men who can figure costs, and so few who can measure values."

10. BIBLIOGRAPHY
• Functions of Money from ICAI General Economics study
material
• Quotes from http://www.happyworker.com
• Green cartoons from clipartof.com
• Background of title page from shutterstock.com
• Data on rupee (7th
slide) from blogspot.com
• Background of 7th
slide from blog.blueornate.com
• Pictures from google images