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Functions Of Money
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Functions Of Money


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Published in: Economy & Finance, Business

  • kuds
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  • Thanks for allowing me to download this presentation. It is rich and comprehensive, and is beneficial for the students and bankers alike. I would appreciate if I can have such more presentations.

    Muhammad Sadiq
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  • 1.  
  • 2. “ The Monetary System”
  • 3. Group Members
    • Miss Samavia Munir
    • Miss Sehrish Taj
    • Mr. Naeem
    • Mr. Aqeel Abbas
    • Mr. Suhail Anjum
  • 4. Contents
    • Definition of Money…
    • Kinds Of Money
    • Functions Of Money
    • The Demand For Money
    • Four Money Supply definitions
    • Determination of Rate of Interest
  • 5. What is Money????
  • 6.
    • “ Money is a good that acts as a medium of exchange in transactions, it is said that money act as a unit of account, a store of value and medium of exchange”
  • 7. Properties Of Money
    • Liquidity
    • Scarcity
    • Portability
    • Uniformity
  • 8. Mr. Aqeel Abbas
  • 9. Kinds Of Money
    • Commodity money
    • Convertible paper money
    • Inconvertible money
    • Bank deposits
    • Electronic money
  • 10. Commodity money
    • Can be used for other purposes.
    • Have inherent value.
    • Examples
    • Gold, Silk, Cattle, Silver
  • 11. Convertible Paper Money
    • The paper money that can be convertible into gold and silver.
    • Examples are Gold and Silver certificates…
  • 12. Inconvertible Paper Money
    • The paper money that can’t be converted into Gold and Silver.
    • Also called as Legal Tender Money.
    • Examples are Notes and Coins issued by government.
  • 13. Bank Deposits
    • In current society most of the money used is Bank deposits…
    • Examples of Bank Deposits are
    • Demand deposits
    • Savings deposits
    • Time deposits
    • Negotiable certificates of deposit
  • 14. Electronic Money
    • The money stored in certain electronic cash cards.
    • Transactions are made electronically.
    • Examples are Credit Card, Debit card, Charge card etc…
  • 15. Mr. Naeem
  • 16. Functions of Money
  • 17. Money as Medium of Exchange
    • No wastage of time.
    • Higher volume of transactions.
    • Remove the problem of coincidence of wants.
    • Widely acceptable.
    • Increase level of Trade.
  • 18. Money as a unit of Account
    • Provide a common measurement for the relative value of goods.
    • The monitory unit may have different name in different countries.
  • 19. Money as a store of Value
    • Ability of money to store value over the time.
    • Durability factor enables to convert your income into future purchases.
    • Completely liquid.
    • However inflation can destroy this function.
  • 20. Miss Sehrish Taj
  • 21. Are credit cards money???
  • 22. Why people hold money???
  • 23. Three motives of holding money!!!
    • Transactions Demand
    • Precautionary Demand
    • Speculative Demand
  • 24. Transactions Demand
    • Stock of money to pay everyday expenses.
    • Quick and easy purchases are main push to hold money.
    • The holder has to suffer “cost of holding”, namely interest rate you forego.
  • 25. Precautionary Motives
    • The stock of money for uncertain expenses.
    • People who don’t want to go for loans have great interest to hold money.
    • Opportunity cost incurs of the interest forego.
  • 26. Speculative Motives
    • Holding of money due to the expected rise in interest rates.
    • People use to convert their money into interest bearing instruments such as bonds, stocks and other non-money financial assets.
    • People hold more when interest rate is low and hold less when interest rate is high.
  • 27. INTEREST
    • The major factor to determine the stock of money held by people is the INTEREST!!!
  • 28. Mr. Suhail Anjum
  • 29. Money Supply Definitions
  • 30. Monetary Base
    • M1
    • Sum of currency in the hands of non-public and stock of cheque account deposits at banks.
    • M3
    • Sum of M1 plus all other bank deposits of non-bank public.
  • 31. Broad Money
    • M3 plus the public’s deposits at non-bank financial institutions less currency and bank deposits held by these NBFI’s.
  • 32. Currency
    • Includes coins and paper money.
    • It constitute 20% of the M1 money supply.
    • Its purpose is to make small purchases.
  • 33. Cheque Account Deposits
    • The total of cheque accounts balances in banks convertible to currency on demand by writing a cheque without advance notice.
    • Saving Deposits
    • Inteset bearing accounts in banks drawnable by issuing pass book.
  • 34. Determination of Interest Rate
  • 35. Equilibrium Interest Rate
  • 36. Excess quantity of money demanded Excess money demand Interest rate rises People sell Bonds Bonds prices fall Excess demand for money causes interest rates to rise.
  • 37. Excess quantity of money supplied Excess money supplied Interest rate falls People buy Bonds Bonds prices rises Excess supply for money causes interest rates to fall.
  • 38. Thanks a lottt!!!
  • 39.