defination of money

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WelcomeWelcome
To our presentationTo our presentation
Topic : About MoneyTopic : About Money

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Submitted to : Masud RanaSubmitted to : Masud Rana
LecturerLecturer
Department of Business AdministrationDepartment of Business Administration
Z.H. Sikder University of Science & TechnologyZ.H. Sikder University of Science & Technology

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No ID Name Batch Program
01 140316050 Shamim Gorapi 8th BBA
02 140316042 Sabuj Dhar 8th BBA
Submitted by

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Money is medium of exchange; Money is anything that reserve as commonlyMoney is medium of exchange; Money is anything that reserve as commonly
accepted medium of exchangeaccepted medium of exchange
Money is any item or verifiable record that is generally acceptedMoney is any item or verifiable record that is generally accepted
as payment for goods and services and repayment of debts in aas payment for goods and services and repayment of debts in a
particular country or socio-economic context, or is easily converted to such aparticular country or socio-economic context, or is easily converted to such a
form.form.
What is moneyWhat is money??

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Evolution of Money is probably one of the biggest inventionsEvolution of Money is probably one of the biggest inventions
in human history. The money was not invented but it evolved with passage ofin human history. The money was not invented but it evolved with passage of
time according to the changing requirements of economies. It is not a result oftime according to the changing requirements of economies. It is not a result of
brain storming of some economist rather there is a long process of evolutionbrain storming of some economist rather there is a long process of evolution
since start of civilization to this modern complicated credit systemsince start of civilization to this modern complicated credit system..
The History of MoneyThe History of Money::

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It is generally believed that evolution of money has passedIt is generally believed that evolution of money has passed
through following six stagesthrough following six stages..
 BarterBarter
 Commodity MoneyCommodity Money
 Metallic MoneyMetallic Money
 Paper MoneyPaper Money
 Credit MoneyCredit Money
 Electronic MoneyElectronic Money

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In the beginning of civilization the needs of people were very limited andIn the beginning of civilization the needs of people were very limited and
therefore they used to Exchange their goods with other people’s goods ortherefore they used to Exchange their goods with other people’s goods or
Service. Such a system of exchange where goods and services are directlyService. Such a system of exchange where goods and services are directly
exchanged for each other without the use of money is called barter system.exchanged for each other without the use of money is called barter system.
Barter is possible only if the wants of the people are very few, area ofBarter is possible only if the wants of the people are very few, area of
exchange is limited and people are living a very simple life. There were manyexchange is limited and people are living a very simple life. There were many
difficulties associated with barter system. So gradually this system ofdifficulties associated with barter system. So gradually this system of
exchange was replaced with money system of exchange.exchange was replaced with money system of exchange.
(1 )Barter(1 )Barter

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Money is in fact discovered to remove Difficulties of barter. In fact money hasMoney is in fact discovered to remove Difficulties of barter. In fact money has
evolved in response to the urgent needs of the various stages of economicevolved in response to the urgent needs of the various stages of economic
growth. In the beginning of civilization goats, animal-hides, axe-heads,growth. In the beginning of civilization goats, animal-hides, axe-heads,
knives, arrows, slaves etc., have been used as money in differentknives, arrows, slaves etc., have been used as money in different
Perform the basic functions of money. It was difficult to borrow and lend andPerform the basic functions of money. It was difficult to borrow and lend and
it was more difficult to measure and store the value of goods and services.it was more difficult to measure and store the value of goods and services.
Further the volume of trade remained very limited due problem ofFurther the volume of trade remained very limited due problem of
transportation of commodity moneytransportation of commodity money..
(2) Commodity Money:(2) Commodity Money:

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Money made of metal is called metallic money. In the beginning the pieces of goldMoney made of metal is called metallic money. In the beginning the pieces of gold
and silver were used as money but it did not solve the complicated problems ofand silver were used as money but it did not solve the complicated problems of
exchange. It was very difficult to I measure the value with these jaw pieces of metal.exchange. It was very difficult to I measure the value with these jaw pieces of metal.
Another problem was transportation and storage of precious metals. This problem wasAnother problem was transportation and storage of precious metals. This problem was
solved by making standardized coins. In the beginning full bodied coins of gold andsolved by making standardized coins. In the beginning full bodied coins of gold and
silver were introduced but latter on these were replaced with token coins. Now asilver were introduced but latter on these were replaced with token coins. Now a
day’s different alloy are being used for minting of coins.day’s different alloy are being used for minting of coins.
The metallic coins have a specific weight and shape. Coins are only used for smallerThe metallic coins have a specific weight and shape. Coins are only used for smaller
retail payments because it is difficult to count, transport and store themretail payments because it is difficult to count, transport and store them..
(3) Metallic Money.(3) Metallic Money.

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In the third stage of the evolution of money paper money was discovered. It isIn the third stage of the evolution of money paper money was discovered. It is
believed that the start of paper money was issuance and acceptance of receiptsbelieved that the start of paper money was issuance and acceptance of receipts
of gold smiths who were acting as money lender in old Iraq.of gold smiths who were acting as money lender in old Iraq.
These goldsmiths were rich, respectable and were men of repute. They used toThese goldsmiths were rich, respectable and were men of repute. They used to
keep the valuables of the people in the safe rooms and issued receipts as akeep the valuables of the people in the safe rooms and issued receipts as a
proof for the goods stored. These certificates became a convenient creditproof for the goods stored. These certificates became a convenient credit
Instruments and were freely used for borrowing and lending and makingInstruments and were freely used for borrowing and lending and making
payment. In the 19th century commercial banks started issuing their own notespayment. In the 19th century commercial banks started issuing their own notes
of different colors and denominations.of different colors and denominations.
It created confusion and were not generally acceptable. Central bank removedIt created confusion and were not generally acceptable. Central bank removed
this confusion by taking over the power of issuing bank notes. In thethis confusion by taking over the power of issuing bank notes. In the
beginning the paper money was fully convertible into full bodied gold coins.beginning the paper money was fully convertible into full bodied gold coins.
During the period between the two world wars, it became difficult to convertDuring the period between the two world wars, it became difficult to convert
the paper money into gold.the paper money into gold.
(4) Paper Money(4) Paper Money

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In the present day modern economies or bank money is used for makingIn the present day modern economies or bank money is used for making
personal business payments. In the developed countries, transactions arepersonal business payments. In the developed countries, transactions are
taking place with the help of deposits or checking accounts with paper money.taking place with the help of deposits or checking accounts with paper money.
Demand deposits or money sited in current accounts are easily convertibleDemand deposits or money sited in current accounts are easily convertible
cash, therefore they are convenient and safe.cash, therefore they are convenient and safe.
(5 )Credit Money:(5 )Credit Money:

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Today the invention of computer and its application, the form and shape ofToday the invention of computer and its application, the form and shape of
business are changing fast. The concept OF commerce is gaining vastbusiness are changing fast. The concept OF commerce is gaining vast
popularity. The mode payment is being transformed from cash or quest topopularity. The mode payment is being transformed from cash or quest to
electronic transaction from one account another. This form of electronicelectronic transaction from one account another. This form of electronic
payment is early referred to as electronic money. There are many problems inpayment is early referred to as electronic money. There are many problems in
this type of transactions, but it aiming popularity day by day. i evolution ofthis type of transactions, but it aiming popularity day by day. i evolution of
money has not come to an end, it will, never come to an end.. As economiesmoney has not come to an end, it will, never come to an end.. As economies
of the world are changing features and shapes, money is also changing its mof the world are changing features and shapes, money is also changing its m
with the due course of time. Globalization of the anomies and expansion of e-with the due course of time. Globalization of the anomies and expansion of e-
commerce has given new dimension to modes of payment and has angled thecommerce has given new dimension to modes of payment and has angled the
nature and features of money.nature and features of money.
6 )Electronic Money:6 )Electronic Money:

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The conventional approach to the definition of money is the oldest approach.The conventional approach to the definition of money is the oldest approach.
According to this approach, the most important function of money in society isAccording to this approach, the most important function of money in society is
to act as a medium of exchange. Money is what money does.to act as a medium of exchange. Money is what money does.
It pays for all the goods and services transacted in the community.It pays for all the goods and services transacted in the community.
Consequently anything is money which functions generally as a medium ofConsequently anything is money which functions generally as a medium of
exchange in the economy.exchange in the economy.
Different approach of the definition of moneyDifferent approach of the definition of money
1. Conventional Approach1. Conventional Approach::

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The Chicago Approach to the concept of money is associated with the viewsThe Chicago Approach to the concept of money is associated with the views
of Prof. Milton Friedman and other monetary theorists of the University ofof Prof. Milton Friedman and other monetary theorists of the University of
Chicago.Chicago.
The Chicago economists have adopted a broader definition of money byThe Chicago economists have adopted a broader definition of money by
including in it besides the currency and chequable or demand deposits, theincluding in it besides the currency and chequable or demand deposits, the
commercial bank time deposits—fixed interest-bearing deposits placed withcommercial bank time deposits—fixed interest-bearing deposits placed with
the commercial banks.the commercial banks.
2. Chicago Approach2. Chicago Approach::

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According to John Gurley and Edward Shaw approach, currency and demandAccording to John Gurley and Edward Shaw approach, currency and demand
deposits are just two among the many claims against financial intermediaries.deposits are just two among the many claims against financial intermediaries.
They emphasise the close substitution relationship between currency, demandThey emphasise the close substitution relationship between currency, demand
deposits, and commercial bank time deposits, saving bank deposits, creditdeposits, and commercial bank time deposits, saving bank deposits, credit
institutions’ shares and bonds etc. all of which are regarded as alternativeinstitutions’ shares and bonds etc. all of which are regarded as alternative
liquid stores of value by the publicliquid stores of value by the public..
3. Gurley and Shaw Approach3. Gurley and Shaw Approach::

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This approach which has been favored by the Central Banking authorities,This approach which has been favored by the Central Banking authorities,
take the broadest possible view of money as though it were synonymous withtake the broadest possible view of money as though it were synonymous with
credit funds lent to the borrowers.credit funds lent to the borrowers.
The supporters of the Central Bank approach have agreed that similarityThe supporters of the Central Bank approach have agreed that similarity
between money and other means of financing purchases justifies the use ofbetween money and other means of financing purchases justifies the use of
much broader concept of money, measurable or unmeasurablemuch broader concept of money, measurable or unmeasurable
4. Central Bank Approach4. Central Bank Approach::

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In one sentence M1 is called Narrow money; M1 is a metric for the moneyIn one sentence M1 is called Narrow money; M1 is a metric for the money
supply of a country and includes physical money, paper and coin as well assupply of a country and includes physical money, paper and coin as well as
checking accounts, demand deposits and negotiable order of withdrawal (NOW)checking accounts, demand deposits and negotiable order of withdrawal (NOW)
accountsaccounts
M1= currency with the public + demand deposits+ other deposit held .M1= currency with the public + demand deposits+ other deposit held .
What is 'M1?'What is 'M1?'

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M2 is defining as the one sentence is board money; M2 is a measure ofM2 is defining as the one sentence is board money; M2 is a measure of
the money supply that includes all elements of M1 as well as "near money."the money supply that includes all elements of M1 as well as "near money."
M1 includes cash and checking deposits, while near money refers to savingsM1 includes cash and checking deposits, while near money refers to savings
deposits, money market securities, mutual funds and other time deposits.deposits, money market securities, mutual funds and other time deposits.
These assets are less liquid than M1 and not as suitable as exchange mediums,These assets are less liquid than M1 and not as suitable as exchange mediums,
but they can be quickly converted into cash or checking deposits.but they can be quickly converted into cash or checking deposits.
M2= M1 + savings deposits with post office savings banksM2= M1 + savings deposits with post office savings banks
What is 'M2?'What is 'M2?'

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M3 is a measure of the money supply that includes M2 as well as large timeM3 is a measure of the money supply that includes M2 as well as large time
deposits, institutional money market funds, short-term repurchasedeposits, institutional money market funds, short-term repurchase
agreements and other larger liquid assets. The M3 measurement includesagreements and other larger liquid assets. The M3 measurement includes
assets that are less liquid than other components of the money supply and areassets that are less liquid than other components of the money supply and are
referred to as "near, near money," which are more closely related to thereferred to as "near, near money," which are more closely related to the
finances of larger financial institutions and corporations than to those of smallfinances of larger financial institutions and corporations than to those of small
businesses and individuals.businesses and individuals.
M3 = M1 + time depositM3 = M1 + time deposit
M4= M3 + total deposits with the post office savings organization.M4= M3 + total deposits with the post office savings organization.
Factors affecting supply = monetary policy of the central bank .commercialFactors affecting supply = monetary policy of the central bank .commercial
banks capacity and policy of credit. Government fiscal policy, community'sbanks capacity and policy of credit. Government fiscal policy, community's
choice.choice.
What is 'M3‘?What is 'M3‘?

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The EndThe End

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