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Money & banking


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Money & banking

  1. 1. Money & Banking1.Introduction and Meaning2.Definition“ Controversial Issue”“Any commodity that is generallyaccepted as a medium of exchangeand a measure of value.” DR G K KALKOTI 1
  2. 2. 3.Functions of Money (182) “Money is matter of functions four,A medium, a measure, a standard & store.”4.Significance of money in a modern economy (184 -186) i. Eliminates Problems of Barter System. ii. Works as a Factor of Production. iii.Accelerates Pace of Production & Growth. iv.Lifeblood of a Modern Economy. v. Other Contributions. - Consumers’ Choices. - Money Market & Credit System. - Efficient Allocations of Financial Resources DR G K KALKOTI 2
  3. 3. 5. The Supply of Money.i) Sources of Money Supply -‘A high power money’ -‘Credit Money’ -‘Non-Banking Financial Institutions (NBFIs)ii) Measures of Money Supply in India DR G K KALKOTI 3
  4. 4. 6.RBI Measures of Money Supply Four Measuresi M1 = C + DD + ODii M2 = M1 + Savings Deposits With POsiii M3 = M2 + Net Time Deposits With CBsiv M4 = M3 + Total Deposits With Pos (NSCs) where, C =Currency held by the public DD = Net Demand Deposits With CBs OD = Other Deposits With RBI NSCs =National Savings Certificates DR G K KALKOTI 4
  5. 5. 7.Demand for MoneyQuantity Theory of MoneyA)Fisherian ApproachIrving FisherMoney as ‘Medium of Exchange.’ MV= PTB)Cambridge ApproachA C Pigue, D R Robertson & J M KeynesMoney as ‘Store of Value.’ DR G K KALKOTI 5
  6. 6. Md=KPYMd = DD for MoneyK = Proportionality factorPY = Nominal National IncomeC) Keynesian ApproachThree Motivesi) Transactions Motive - Activeii) Precautionary Motive- Idleiii)Speculative Motive- Idle INTEREST RATES6 DR G K KALKOTI