functions of money


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a detailed presentation on economics and functions of money

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functions of money

  1. 1.  "It doesnt matter if youre black or white... the only color that really matters is green." - Family GuyIssued By:The Ministry of Finance:Section: IVClauses: 491 to 500
  2. 2. TYPES OF MONEYCommodity MoneyMetallicMoney PaperMoneyBankCreditElectronicMoneyRepresentativemoneyConvertibleInconvertible“You cant buy happiness but you can buy icecream and that’s kind of the same thing.”
  3. 3. MONEY CAN ALSO BE CLASSIFIED AS:HardMoneySoftMoneyNoMoney-Noble metals-Real universal value-Gold, silver, platinum-Paper money backedby hard money-Silver or goldcertificates-Backed by nothingof value-Fiat money-Currency"Finance is the art of passing money from hand to hand until it finally disappears."
  4. 4. PAPER MONEY: Representative and ConvertiblePoints Representative Convertible1. Backed by goldand silver reserves?Fully Partially (by goldreserves and bysecurities2. Fear of over- issue No Yes3. Public Confidence Yes Yes (but not so muchas representative)4. Elasticity Not elastic Flexible5. Value of metallicreservesEqual to the value ofthe notes issuedLess than the value ofthe notes issued
  5. 5. INCONVERTIBLE MONEY: FIAT MONEYNot convertible intostandard coins orvaluable metalsElasticaccording to theneeds of theeconomyRisk of over issueand inflationless publicconfidenceBacked neither bythe metallic nor thefiduciary reserves.Unlimitedlegal tender“Inflation is when you pay fifteen dollars for the ten-dollar haircut youused to get for five dollars when you had hair.”—Sam Ewing
  6. 6. CURRENCY OR MONEY?Are these two the same? Can you notice the difference?
  7. 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 1008,420,409,791,000= 5.76% (6% approx)• 94% of the currency backing is foreignsecurities.• Indian rupee – Convertible paper money"The mint makes it first, it is up to you to make it last.”
  8. 8. BANK MONEY AND ELECTRONIC MONEY• Funds held in demand deposit accounts incommercial banks.• Form the greater part of the money supply ofa country.• Can be used, via cheques and drafts, as ameans of paymentElectronic Money- Digital equivalent ofcash- Stored on an electronicdevice or remotelyat a server- Credit card/debit carddifferent from e-money- A smartcard storesbank accountinformation andholds 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. 9. FUNCTIONS OF MONEYMedium ofexchangeStore ofvalueUnit ofaccountStandard ofdeferredpaymentsEncourages divisionof labourTransformssavings intoinvestmentsDirectsEconomicTrends"There are so many men who can figure costs, and so few who can measure values."
  10. 10. BIBLIOGRAPHY• Functions of Money from ICAI General Economics studymaterial• Quotes from• Green cartoons from• Background of title page from• Data on rupee (7thslide) from• Background of 7thslide from• Pictures from google images