money, functions of money, evaluation of money, Demand and Supply of money, Measurment theory of money, Money stocks, and Demonitization

1. MoneyMoney
Money is what ,what money doesMoney is what ,what money does
Money refers to anything which is accepted asMoney refers to anything which is accepted as --
1.Medium of exchange,1.Medium of exchange,
2.Measure of value,2.Measure of value,
3.Store of value,3.Store of value,
4.Means for standard of deferred payment.4.Means for standard of deferred payment.

2. Functions of moneyFunctions of money
 PrimaryPrimary
functionfunction
1.Medium of exchange1.Medium of exchange
2.Measure of value2.Measure of value
 SecondarySecondary
functionfunction
3. Store of value3. Store of value
4. Standard of deferred4. Standard of deferred
paymentpayment

4. Medium of exchangeMedium of exchange
 Money as aMoney as a
medium ofmedium of
exchange,exchange,
means that itmeans that it
can be usedcan be used
to maketo make
payment forpayment for
allall
transactionstransactions
of goods andof goods and
services .services .

5. Measure of valueMeasure of value
 Money as aMoney as a
measure of valuemeasure of value
means thatmeans that
money work asmoney work as
commoncommon
denomination indenomination in
which value ofwhich value of
all goods andall goods and
services areservices are
expressed.expressed.

6. Store of valueStore of value
 Money as aMoney as a
store of valuestore of value
means thatmeans that
money can bemoney can be
used toused to
transfertransfer
purchasingpurchasing
power frompower from
present topresent to
future.future.

7. Standard of deferred paymentsStandard of deferred payments
 Money as a standard ofMoney as a standard of
deferred payments means .deferred payments means .

8. Evolution of moneyEvolution of money
 Money has evolved throughMoney has evolved through
different stages according todifferent stages according to
time , place and circumtances.time , place and circumtances.
1.1. Commodity moneyCommodity money
2.2. Metallic moneyMetallic money
3.3. Paper moneyPaper money
4.4. Credit moneyCredit money
5.5. Plastic moneyPlastic money

9. Commodity moneyCommodity money
 Goods like saltGoods like salt
, rice , wheat ,, rice , wheat ,
weapons etcweapons etc
werewere
commonlycommonly
used as moneyused as money
such exchangesuch exchange
of good forof good for
good wasgood was
known asknown as
“Barter“Barter
system” .system” .

10. Metallic moneyMetallic money
 Metal like gold, silver, copperMetal like gold, silver, copper
etc were used as they couldetc were used as they could
be easily handled and therebe easily handled and there
quantity can be easilyquantity can be easily
ascertained.ascertained.
 it was the main form ofit was the main form of
money through out the majormoney through out the major
portion of recorded history.portion of recorded history.

11. Paper moneyPaper money
 It was found inIt was found in
convinient as wellconvinient as well
as dangerous toas dangerous to
carry gold andcarry gold and
silver coin fromsilver coin from
place to place .place to place .
So innovation ofSo innovation of
paper moneypaper money
marked a verymarked a very
important stageimportant stage
in development ofin development of
money . It ismoney . It is
regulated andregulated and
controlled by RBI.controlled by RBI.

12. Credit moneyCredit money
 Emergency ofEmergency of
credit money tookcredit money took
place almost sideplace almost side
by side with thatby side with that
of paper money.of paper money.
People keep apartPeople keep apart
of their cash asof their cash as
deposit withdeposit with
banks which theybanks which they
can withdrawcan withdraw
through cheques.through cheques.
The chequesThe cheques
(known as credit(known as credit
money / bankmoney / bank
money)money)

13. Plastic moneyPlastic money
 The latest type of money isThe latest type of money is
plastic money in form ofplastic money in form of
credit cards and debit cards .credit cards and debit cards .
They aim at removing theThey aim at removing the
need for carrying cash toneed for carrying cash to
make transactions.make transactions.

14. Money supplyMoney supply
 Money supply refers to totalMoney supply refers to total
volume of money held byvolume of money held by
public at a particular point ofpublic at a particular point of
time.time.
 It is a stock concept.It is a stock concept.

15. Measure of money supplyMeasure of money supply
 There are four measures ofThere are four measures of
money supply in India whichmoney supply in India which
are denoted by M1, M2,are denoted by M1, M2,
M3 and M4. ThisM3 and M4. This
classification was introducedclassification was introduced
by the Reserve Bank of Indiaby the Reserve Bank of India
(RBI) in April 1977.(RBI) in April 1977.

16. MM11 andand MM22
 MM11 = Currency and coin with= Currency and coin with
public + demand deposit withpublic + demand deposit with
commercial bank + othercommercial bank + other
deposit with RBIdeposit with RBI
 MM22 = M= M11 + Saving deposit with+ Saving deposit with
post office saving bank.post office saving bank.

17. MM33 ANDAND MM44
 MM33 == MM11 + Net time deposit with+ Net time deposit with
BanksBanks
 MM44 == MM33 + Total deposit with post+ Total deposit with post
office saving bankoffice saving bank
(Excluding NSC)(Excluding NSC)
 NSC is National SavingNSC is National Saving
Certificate.Certificate.

18. Demand for moneyDemand for money
 There are three mainThere are three main
motives for which money ismotives for which money is
wanted by peoplewanted by people
1.1. Transaction motiveTransaction motive
2.2. Precautionary motivePrecautionary motive
3.3. Speculative motiveSpeculative motive

20. Transaction moneyTransaction money
 It refers to the demand forIt refers to the demand for
money for conducting day tomoney for conducting day to
day transactions .day transactions .
 The transaction motiveThe transaction motive
related to demand for moneyrelated to demand for money
to meet the currentto meet the current
transactions of individual andtransactions of individual and
busniess unit.busniess unit.

21. Precautionary motivePrecautionary motive
 It refers toIt refers to
the desire ofthe desire of
people to holdpeople to hold
cash balancecash balance
for unforseenfor unforseen
contengency.contengency.

22. Speculative motiveSpeculative motive
 It refers to desire of holder toIt refers to desire of holder to
keep cash balance as ankeep cash balance as an
alternative to financialalternative to financial
assets like bonds, shares,assets like bonds, shares,
debentures.debentures.

23. DemonitisationDemonitisation
 Demonitisation is the act ofDemonitisation is the act of
removing a currency unit of itsremoving a currency unit of its
status as legal tender.status as legal tender.
 Demonitisation is necessaryDemonitisation is necessary
whenever there is a change ofwhenever there is a change of
national currencynational currency

24. Demonitisation in INDIADemonitisation in INDIA
 OnOn
88thth
,november,2016,november,2016
the indianthe indian
governmentgovernment
decide todecide to
demonitise thedemonitise the
500 and 1000500 and 1000
rupees notes, therupees notes, the
two biggesttwo biggest
demonitisationdemonitisation
notes.notes.

25. Benefits of DemonitisationBenefits of Demonitisation
 Reduction in black money.Reduction in black money.
 Reduction in illegalReduction in illegal
activities.activities.
 Cash less economy.Cash less economy.
 Reduction in governmentReduction in government
liablity.liablity.
 Increase is tax revenue.Increase is tax revenue.

26. Adverse effects of DemonitisationAdverse effects of Demonitisation
 Incovenience to people.Incovenience to people.
 Costly for government.Costly for government.
 Difficulty in non-cash transaction.Difficulty in non-cash transaction.
 Corruption or frod.Corruption or frod.
 Huge loss to daily wages earners.Huge loss to daily wages earners.

27. ConclusionConclusion
 Removal of old 1000 and 500Removal of old 1000 and 500
rupees notes andrupees notes and
replacement of same withreplacement of same with
new 500 and 2000 rupees isnew 500 and 2000 rupees is
expected to remove blackexpected to remove black
money .money .
 It is expected thatIt is expected that
demonitisation will bringdemonitisation will bring
positive change in ourpositive change in our
economy.economy.