The document discusses the barter system, limitations of barter, and the functions and components of money. Under the barter system, direct exchange of goods occurs without a common medium of exchange. This leads to limitations like the lack of a double coincidence of wants. Money serves as a medium of exchange, measure of value, and store of value. It allows for deferred payments and the transfer of value. The money supply has two components - currency held by the public, and net demand deposits held at banks.

2. Money

3. Barter System
Barter Exchange:
Direct exchange of a commodity against another commodity
without the use of money is called Barter Exchange.
Barter Economy:
An economy where there is a direct barter of goods & services.
C-C Economy

4. Limitations of Barter Exchange
Lack of double coincidence of wants.
Lack of common unit of exchange.
Lack of standard for deferred payments.
Lack the system of transfer of value.

5. Money
Money is anything which is generally acceptable as
means of exchange and at the same time acts as a
measure of value and as a store of value.

6. Functions of Money
A. Primary Functions:
i. Money is medium of exchange: A person can sell his goods
and services in exchange for money and can use this money
for buying the goods and services that he needs.
ii. Money is measure of value: money is a useful measuring rod
i.e. in terms of money, the values of other commodities and
services are measured, compared and expressed.

7. Functions of Money
B. Secondary Function:
i. Standard for Deferred Payments: deferred payment refer to these
payments which are made in future. Money serves as a standard of
payments contracted to be made in future.
ii. Store of Value: Money acts as a store of value. It is acceptable at
any point of time. It is not perishable so it can be used for future
use.
iii.Transfer of Value: Money helps us to transfer from one person to
another from one place to another.

8. Money Supply
Money supply refers to total quantity or stock of
money available in the economy at particular
point of time.

9. Components of Money Supply:
A. Currency held by Public
i. Coins
ii. Paper Currency

10. Components of Money Supply:
B. Net demand deposit held by the Bank (DD): These are current account deposits which are
payable on demand.