Paper Money and Stage of Money

1. Money
Its Uses and Characteristics
PROF.FAISAL AZAM

2. Money
Money is any item or verifiable record that is generally
accepted as payment for goods and services and
repayment of debts, such as taxes.
any circulating medium of exchange, including
coins, paper money, and demand deposits.

3. …a Medium of Exchange
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By definition, a Medium of
Exchange is anything that is
used to determine value during
the exchange of goods and
services.
Money allows us to use
systems of trade beyond the
Barter System.


Bartering is directly trading
one good or service for
another.
Your money acts as a common
ground for determining value.

4. …a Unit of Account

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
Money can be used as a
means to compare the
values of goods and
services.
You can use the monetary
value assigned to a specific
good or service to compare it
to one offered by a different
provider.
Money allows us to compare
similar offers for goods and
services to determine the
best value.

5. …a Store of Value


Money is used to maintain
the value of a transaction
over time.
If you receive monetary
compensation for a good or
service, the actual amount
that your received does not
change if you do not use it
immediately.

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You can spend, or
exchange, your money at
a later time without
penalty.
However, the functional
value of the stored money
may change over time due to
other factors.

6. What then is Money?
 An item must have six key characteristics to
be considered as “Money”.
 These Characteristics are:
 Durability
 Portability
 Divisibility
 Uniformity
 Limited Supply
 Acceptability

7. Durability
 Durability means that
the item must be able to
withstand being used
repeatedly.
 Items that are
considered Currency,
coins and paper bills
used as money meet
this requirement.

8. Portability
 Portability means that
individuals are able to
carry money with them
and transfer it easily to
other individuals.
 This is why coins and
paper money have
historically proved
popular.

9. Divisibility
 Divisibility means that
the money can easily be
divided into smaller
units of value.
 Today, different coins
and notes convey these
fractional values.

10. Homogeneity
• Its means that all portions of the material used as
money should be same and homogeneous. The same
quality, equal weight and exactly the same value.
• if any commodity lacks homogeneity , it will not be
easy to divide and sub-divide it.

11. Stability of value
• It is very necessary that the money should not be to
wide fluctuation in the value.
• If it is so, then people will suffer a great deal.
• Is means the commodity used as a money should
have the stability in value so that people may use it
for the settlement of transaction.

12. Easily Recognized
Money has pass from
hand to hand, so it
should be such that it
may be easily
recognized by
anyone.

13. Elasticity
A good money is that which possess the quality of
elasticity .
Money should be such which can be expanded or
contracted according to need of nation and requirement
of economy

14. Government Support
• A good money martial must be supported or backed
by the government .
• The people accept even permission money due to
govt support.

15. Limited Supply
 Limited Supply means
that restrictions on the
amount of money in
circulation ensure that
values remain relatively
constant for the
currency.
 The responsibility for
maintaining an
adequate money supply
falls on the Federal
Reserve System.

16. Acceptability
 Acceptability means that everyone must be able to
use the money for transactions.
 In the United States this is indicated on our paper
bills by the notation: “This note is legal tender for all
debts, public and private”.