The document discusses money markets, which are markets for short-term borrowing and lending between financial institutions. Money markets allow institutions to manage liquidity needs and governments to raise short-term funds. Products traded include treasury bills, commercial paper, and certificates of deposit. Money markets are important for providing capital to industry and trade, offering investment opportunities for banks, facilitating monetary policy implementation, and supporting economic development and efficient banking systems.
This document provides an overview of international monetary systems and foreign exchange. It discusses the need to understand foreign exchange due to global trade involving multiple currencies. It describes hard and soft currencies and the functions of currency. It also outlines different exchange rate systems like the gold standard, Bretton Woods system, and classifications of exchange rate regimes including floating, pegged, and currency board arrangements. It concludes with descriptions of foreign exchange markets, hedging, and the difference between spot and forward markets.
I’m a young Pakistani Blogger, Academic Writer, Freelancer, Quaidian & MPhil Scholar, Quote Lover, Co-Founder at Essar Student Fund & Blueprism Academia, belonging from Mehdiabad, Skardu, Gilgit Baltistan, Pakistan.
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The document discusses foreign exchange and the foreign exchange market. It defines foreign exchange as the exchange of currencies between countries. The foreign exchange market allows currencies to be bought and sold and facilitates international trade and investment. It operates globally 24/7 through electronic networks and connects various participants such as banks, businesses, investors, and central banks.
The document discusses various segments of the international financial market (IFM). The IFM allows buyers and sellers to trade financial assets across borders, motivated by factors like interest rate differences and economic growth prospects. The key segments discussed are the foreign exchange market, international bonds market, international equity market, international money market, and international credit market. The foreign exchange market, being the largest financial market globally, facilitates international trade and transactions through currency conversion. It involves spot rates, forward rates, and participants like importers/exporters. The international bonds market includes foreign and euro bonds that allow companies to raise long-term funds in foreign currencies.
The document discusses international financial markets. It defines international finance markets as mechanisms that facilitate the transfer of funds across national boundaries. The key segments of international financial markets discussed are foreign exchange markets, international bond markets, and international equity markets. Foreign exchange markets allow for the conversion of currencies needed for international trade and transactions. International bond and equity markets allow companies to raise long-term funds in foreign currencies through issues of bonds and stock in other countries.
This document provides an overview of the foreign exchange market, including its organization, participants, and key components. It discusses the spot market and forward market. The spot market facilitates immediate currency transactions that are settled within 2 business days. The forward market allows participants to agree to exchange currencies at a future date at a fixed rate. Major participants in the foreign exchange market include commercial banks, brokers, customers, arbitrageurs, traders, hedgers and speculators. The market sees over $1.2 trillion in daily volume and is centered in major financial hubs like London, New York and Tokyo.
This document provides an overview of international monetary systems and foreign exchange. It discusses the need to understand foreign exchange due to global trade involving multiple currencies. It describes hard and soft currencies and the functions of currency. It also outlines different exchange rate systems like the gold standard, Bretton Woods system, and classifications of exchange rate regimes including floating, pegged, and currency board arrangements. It concludes with descriptions of foreign exchange markets, hedging, and the difference between spot and forward markets.
I’m a young Pakistani Blogger, Academic Writer, Freelancer, Quaidian & MPhil Scholar, Quote Lover, Co-Founder at Essar Student Fund & Blueprism Academia, belonging from Mehdiabad, Skardu, Gilgit Baltistan, Pakistan.
I am an academic writer & freelancer! I can work on Research Paper, Thesis Writing, Academic Research, Research Project, Proposals, Assignments, Business Plans, and Case study research.
Expertise:
Management Sciences, Business Management, Marketing, HRM, Banking, Business Marketing, Corporate Finance, International Business Management
For Order Online:
Whatsapp: +923452502478
Portfolio Link: https://blueprismacademia.wordpress.com/
Email: arguni.hasnain@gmail.com
Follow Me:
Linkedin: arguni_hasnain
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The document discusses foreign exchange and the foreign exchange market. It defines foreign exchange as the exchange of currencies between countries. The foreign exchange market allows currencies to be bought and sold and facilitates international trade and investment. It operates globally 24/7 through electronic networks and connects various participants such as banks, businesses, investors, and central banks.
The document discusses various segments of the international financial market (IFM). The IFM allows buyers and sellers to trade financial assets across borders, motivated by factors like interest rate differences and economic growth prospects. The key segments discussed are the foreign exchange market, international bonds market, international equity market, international money market, and international credit market. The foreign exchange market, being the largest financial market globally, facilitates international trade and transactions through currency conversion. It involves spot rates, forward rates, and participants like importers/exporters. The international bonds market includes foreign and euro bonds that allow companies to raise long-term funds in foreign currencies.
The document discusses international financial markets. It defines international finance markets as mechanisms that facilitate the transfer of funds across national boundaries. The key segments of international financial markets discussed are foreign exchange markets, international bond markets, and international equity markets. Foreign exchange markets allow for the conversion of currencies needed for international trade and transactions. International bond and equity markets allow companies to raise long-term funds in foreign currencies through issues of bonds and stock in other countries.
This document provides an overview of the foreign exchange market, including its organization, participants, and key components. It discusses the spot market and forward market. The spot market facilitates immediate currency transactions that are settled within 2 business days. The forward market allows participants to agree to exchange currencies at a future date at a fixed rate. Major participants in the foreign exchange market include commercial banks, brokers, customers, arbitrageurs, traders, hedgers and speculators. The market sees over $1.2 trillion in daily volume and is centered in major financial hubs like London, New York and Tokyo.
The money supply is the total stock of money available in an economy at a given time and can be defined in different ways. The monetary base (M0) comprises cash in circulation and central bank reserves. Narrow money (M1) includes M0 as well as checkable deposits and some savings. Broad money (M2) contains M1 plus long-term savings deposits, capturing money fulfilling both medium of exchange and store of value functions.
Module - 1 :
The foreign exchange market, structure and organization- mechanics of currency trading
– types of transactions and settlement dates – exchange rate quotations and arbitrage – arbitrage with and without transaction costs – swaps and deposit markets – option forwards – forward swaps and swap positions – Interest rate parity theory.
This document outlines ten principles of economics grouped into three sections: how people make decisions, how people interact, and how the economy as a whole works. Some key principles discussed include people facing trade-offs, rational people thinking at the margin, and trade being able to make everyone better off. The document also discusses money, its roles, and how central banks use monetary policy tools like open market operations and quantitative easing to influence the money supply and transmit money to the public.
The document discusses the balance of payments (BOP), which tracks all international monetary transactions into and out of a country. The BOP is divided into the current account, capital account, and financial account. The current account covers trade in goods, services, and investment income. The capital account covers financial transfers like foreign direct investment. The financial account records international investment flows. The document also discusses the gold standard, special drawing rights (SDR), the Bretton Woods system, and international liquidity.
Banking involves accepting deposits and lending money, while finance deals with allocating resources and managing money. Money serves as a medium of exchange, unit of account, and store of value in an economy. The central bank, like the Bangko Sentral ng Pilipinas, oversees the financial system and influences the money supply through various monetary policy tools.
This document provides an overview of foreign exchange markets and key concepts. It defines foreign currency and foreign exchange according to the Foreign Exchange Act of 1947. It then discusses the decentralized global foreign exchange market where participants can buy and sell currencies. Key points include that it is the largest financial market, operates 24 hours a day across time zones, and includes both physical and over-the-counter exchange. Exchange rates and foreign exchange transactions are also briefly explained.
This document provides an overview of foreign exchange, including:
- Foreign exchange involves the conversion of one country's currency into another country's currency to facilitate international money transfers.
- Banks facilitate foreign exchange by converting currencies using credit instruments like bills of exchange, promissory notes, letters of credit, and telegraphic transfers.
- Bangladesh's foreign exchange market is regulated by the Bangladesh Bank and operated through authorized dealers, which are bank branches authorized to buy and sell foreign currencies, and authorized money changers, which purchase and sell foreign currencies from tourists.
It will help to understand what is Foreign Exchange Market.
And Who are the Traders are present in market for stocks.
It will also help to understand the nature of Foreign exchange.
The document discusses foreign exchange management. It provides details about the foreign exchange market, including that it is a worldwide network of banks, brokers, corporations and central banks that buy and sell currencies. The market functions 24 hours a day. It also discusses the major participants in the market like commercial banks, customers, central banks, and speculators. Furthermore, it explains different types of transactions in the various markets like spot, forward and cash transactions. It also covers exchange rate systems used by different countries like the gold standard and floating exchange rates.
The document provides an overview of the foreign exchange market. It discusses that the foreign exchange market allows for the exchange of one country's currency for another and determines exchange rates. It operates as an over-the-counter, decentralized global market open 24 hours. Major players include banks, corporations, central banks, speculators, and arbitrageurs. Common transaction types are spots, forwards, and swaps. Factors like interest rates, inflation, economic growth, and political stability influence exchange rates.
This document provides an overview of money markets and capital markets. It defines money markets as markets for short-term loans or financial assets with maturities of one year or less. Capital markets are for longer-term funds exceeding one year. Key differences are discussed, including liquidity, risk level, and the presence of secondary markets.
The document then describes various characteristics of developed money markets, including an organized banking system, presence of a central bank, availability of credit instruments, and integrated interest rates across submarkets. It lists several instruments that make up money markets, such as treasury bills, commercial paper, and call money markets. Recent developments in integrating organized and unorganized sectors are also mentioned.
Velocity of money is calculated by dividing GDP by the value of money supply. Different measurements of money supply (M0, M1, M2, M3) show different velocities, as they represent different components of the money supply. M0 only includes currency in circulation and bank reserves, while M3 includes a broader range of assets. Understanding how money moves between entities in an economy helps explain why velocity, or the rate of money circulation, is important for economic growth.
Forex management Study Note Calicut universityAmal James
UNIVERSITY OF CALICUT
MASTER OF BUSINESS ADMINISTRATION
BUS4E F05/IB05 FOREX MANAGEMENT
Time 60 hours 4 credits
Module I
Meaning of the Term “Foreign Exchange”, Exchange Market, Statutory basis of Foreign Exchange, Evolution of Exchange Control, Outline of Exchange Rate and Types, Import Export India’s Forex Scenario: BOP crisis of 1990, LOERMS, Convertibility.Introduction to International Monetary Developments: Gold standard, Bretton Woods’s system, Fixed Flexible Exchange Rate Systems, Euro market.
Module II
Finance Function: Financial Institutions in International Trade. Non-resident Accounts: Reparable and Non Reparable, Significance for the Economy and Bank. Methods of IN Trade Settlement: Open Account, Clean Advance, Documentary Credit, Documentary Collection. -- Documentary Credits (Letter of Credit): Types of LC – Parties, Mechanism with illustration.
Module III
Documents involved in International trade: Statutory Documents, Financial Documents, Transport Documents, Risk Bearing Documents. INCOTERMS: C.I.F., F.O.B., C.I.P. Financing of Imports by Opening of Letter of Credit: Documents required, Trade and Exchange Control Formalities, Sanction of LC Limit. -- Export Finance: Financing of Export/ Deemed Export: Pre ship, and Post Ship Finance, Export Methods --, E.C.G.C. and other formalities. Uniform Custom Practices of Documentary Credits -- Uniform Rules Collection
Module IV
Introduction to Exchange Rate Mechanism: Spot- Forward Rate, Exchange Arithmetic - Deriving the Actual Exchange Rate: Forwards, Swaps, Futures and Options. Guarantees in Trade: Performance, Bid Bond etc.
The document provides an overview of the monetary system, including:
1) It defines money as a medium of exchange used to purchase goods and services, as officially issued coins, notes, and currency.
2) It outlines the three main functions of money: as a medium of exchange, a unit of account, and a store of value.
3) It describes the different kinds of money like metallic, paper, and private bank money as well as types like commodity, fiat, and fiduciary money.
This document provides an overview of foreign exchange, including definitions, markets, exchange rate systems, and instruments of foreign payment. It defines foreign exchange as the currency of other countries and explains that foreign exchange markets allow countries to settle international debts. The two main exchange rate systems are fixed and floating rates. Under a fixed system the rate is set, while under a floating system the rate is determined by market forces. Common instruments for foreign payments include letters of credit, bills of exchange, bank drafts, and money orders. Exchange controls are implemented by governments to manage exchange rates and the balance of payments.
This document is a final project report submitted by Akash Sudhir Salve to the Yadavrao Tasgaonkar Institute of Management Studies and Research. The project examines India's foreign exchange reserves from 2007 to 2012. It includes sections on the objectives of the study, history and structure of foreign exchange markets, types of foreign exchange risk and hedging, methodology, analysis of data, findings, and the impact of foreign exchange on the Indian economy and business. The report also contains a case study, lessons on avoiding forex trading mistakes, and conclusions.
This document discusses fiat currency and provides arguments against its legitimacy from an Islamic perspective. It begins with definitions of key terms like money, currency, and fiat money. It then outlines the historical development of fiat currency and arguments for and against it. The document argues that fiat currency poses threats to Islamic ideals and the maqasid (objectives) of shariah by eroding its foundations over time and causing economic harms. It proposes some intermediate alternative payment systems that could better align with shariah objectives while being practically feasible.
Money has evolved over time from a barter system to increasingly abstract forms. Early currencies included commodities like grains, metals, and animals before standardized coins were developed in China and Lydia. Paper money and checks later emerged, allowing transactions to occur without physical exchange. Today, digital forms of money including credit, debit, and digital currencies perform the core functions of serving as a medium of exchange, store of value, and unit of account. Banks have facilitated transactions through checks, credit, and more recently plastic forms of money like credit cards since the development of formal banking institutions in ancient Rome.
The money supply is the total stock of money available in an economy at a given time and can be defined in different ways. The monetary base (M0) comprises cash in circulation and central bank reserves. Narrow money (M1) includes M0 as well as checkable deposits and some savings. Broad money (M2) contains M1 plus long-term savings deposits, capturing money fulfilling both medium of exchange and store of value functions.
Module - 1 :
The foreign exchange market, structure and organization- mechanics of currency trading
– types of transactions and settlement dates – exchange rate quotations and arbitrage – arbitrage with and without transaction costs – swaps and deposit markets – option forwards – forward swaps and swap positions – Interest rate parity theory.
This document outlines ten principles of economics grouped into three sections: how people make decisions, how people interact, and how the economy as a whole works. Some key principles discussed include people facing trade-offs, rational people thinking at the margin, and trade being able to make everyone better off. The document also discusses money, its roles, and how central banks use monetary policy tools like open market operations and quantitative easing to influence the money supply and transmit money to the public.
The document discusses the balance of payments (BOP), which tracks all international monetary transactions into and out of a country. The BOP is divided into the current account, capital account, and financial account. The current account covers trade in goods, services, and investment income. The capital account covers financial transfers like foreign direct investment. The financial account records international investment flows. The document also discusses the gold standard, special drawing rights (SDR), the Bretton Woods system, and international liquidity.
Banking involves accepting deposits and lending money, while finance deals with allocating resources and managing money. Money serves as a medium of exchange, unit of account, and store of value in an economy. The central bank, like the Bangko Sentral ng Pilipinas, oversees the financial system and influences the money supply through various monetary policy tools.
This document provides an overview of foreign exchange markets and key concepts. It defines foreign currency and foreign exchange according to the Foreign Exchange Act of 1947. It then discusses the decentralized global foreign exchange market where participants can buy and sell currencies. Key points include that it is the largest financial market, operates 24 hours a day across time zones, and includes both physical and over-the-counter exchange. Exchange rates and foreign exchange transactions are also briefly explained.
This document provides an overview of foreign exchange, including:
- Foreign exchange involves the conversion of one country's currency into another country's currency to facilitate international money transfers.
- Banks facilitate foreign exchange by converting currencies using credit instruments like bills of exchange, promissory notes, letters of credit, and telegraphic transfers.
- Bangladesh's foreign exchange market is regulated by the Bangladesh Bank and operated through authorized dealers, which are bank branches authorized to buy and sell foreign currencies, and authorized money changers, which purchase and sell foreign currencies from tourists.
It will help to understand what is Foreign Exchange Market.
And Who are the Traders are present in market for stocks.
It will also help to understand the nature of Foreign exchange.
The document discusses foreign exchange management. It provides details about the foreign exchange market, including that it is a worldwide network of banks, brokers, corporations and central banks that buy and sell currencies. The market functions 24 hours a day. It also discusses the major participants in the market like commercial banks, customers, central banks, and speculators. Furthermore, it explains different types of transactions in the various markets like spot, forward and cash transactions. It also covers exchange rate systems used by different countries like the gold standard and floating exchange rates.
The document provides an overview of the foreign exchange market. It discusses that the foreign exchange market allows for the exchange of one country's currency for another and determines exchange rates. It operates as an over-the-counter, decentralized global market open 24 hours. Major players include banks, corporations, central banks, speculators, and arbitrageurs. Common transaction types are spots, forwards, and swaps. Factors like interest rates, inflation, economic growth, and political stability influence exchange rates.
This document provides an overview of money markets and capital markets. It defines money markets as markets for short-term loans or financial assets with maturities of one year or less. Capital markets are for longer-term funds exceeding one year. Key differences are discussed, including liquidity, risk level, and the presence of secondary markets.
The document then describes various characteristics of developed money markets, including an organized banking system, presence of a central bank, availability of credit instruments, and integrated interest rates across submarkets. It lists several instruments that make up money markets, such as treasury bills, commercial paper, and call money markets. Recent developments in integrating organized and unorganized sectors are also mentioned.
Velocity of money is calculated by dividing GDP by the value of money supply. Different measurements of money supply (M0, M1, M2, M3) show different velocities, as they represent different components of the money supply. M0 only includes currency in circulation and bank reserves, while M3 includes a broader range of assets. Understanding how money moves between entities in an economy helps explain why velocity, or the rate of money circulation, is important for economic growth.
Forex management Study Note Calicut universityAmal James
UNIVERSITY OF CALICUT
MASTER OF BUSINESS ADMINISTRATION
BUS4E F05/IB05 FOREX MANAGEMENT
Time 60 hours 4 credits
Module I
Meaning of the Term “Foreign Exchange”, Exchange Market, Statutory basis of Foreign Exchange, Evolution of Exchange Control, Outline of Exchange Rate and Types, Import Export India’s Forex Scenario: BOP crisis of 1990, LOERMS, Convertibility.Introduction to International Monetary Developments: Gold standard, Bretton Woods’s system, Fixed Flexible Exchange Rate Systems, Euro market.
Module II
Finance Function: Financial Institutions in International Trade. Non-resident Accounts: Reparable and Non Reparable, Significance for the Economy and Bank. Methods of IN Trade Settlement: Open Account, Clean Advance, Documentary Credit, Documentary Collection. -- Documentary Credits (Letter of Credit): Types of LC – Parties, Mechanism with illustration.
Module III
Documents involved in International trade: Statutory Documents, Financial Documents, Transport Documents, Risk Bearing Documents. INCOTERMS: C.I.F., F.O.B., C.I.P. Financing of Imports by Opening of Letter of Credit: Documents required, Trade and Exchange Control Formalities, Sanction of LC Limit. -- Export Finance: Financing of Export/ Deemed Export: Pre ship, and Post Ship Finance, Export Methods --, E.C.G.C. and other formalities. Uniform Custom Practices of Documentary Credits -- Uniform Rules Collection
Module IV
Introduction to Exchange Rate Mechanism: Spot- Forward Rate, Exchange Arithmetic - Deriving the Actual Exchange Rate: Forwards, Swaps, Futures and Options. Guarantees in Trade: Performance, Bid Bond etc.
The document provides an overview of the monetary system, including:
1) It defines money as a medium of exchange used to purchase goods and services, as officially issued coins, notes, and currency.
2) It outlines the three main functions of money: as a medium of exchange, a unit of account, and a store of value.
3) It describes the different kinds of money like metallic, paper, and private bank money as well as types like commodity, fiat, and fiduciary money.
This document provides an overview of foreign exchange, including definitions, markets, exchange rate systems, and instruments of foreign payment. It defines foreign exchange as the currency of other countries and explains that foreign exchange markets allow countries to settle international debts. The two main exchange rate systems are fixed and floating rates. Under a fixed system the rate is set, while under a floating system the rate is determined by market forces. Common instruments for foreign payments include letters of credit, bills of exchange, bank drafts, and money orders. Exchange controls are implemented by governments to manage exchange rates and the balance of payments.
This document is a final project report submitted by Akash Sudhir Salve to the Yadavrao Tasgaonkar Institute of Management Studies and Research. The project examines India's foreign exchange reserves from 2007 to 2012. It includes sections on the objectives of the study, history and structure of foreign exchange markets, types of foreign exchange risk and hedging, methodology, analysis of data, findings, and the impact of foreign exchange on the Indian economy and business. The report also contains a case study, lessons on avoiding forex trading mistakes, and conclusions.
This document discusses fiat currency and provides arguments against its legitimacy from an Islamic perspective. It begins with definitions of key terms like money, currency, and fiat money. It then outlines the historical development of fiat currency and arguments for and against it. The document argues that fiat currency poses threats to Islamic ideals and the maqasid (objectives) of shariah by eroding its foundations over time and causing economic harms. It proposes some intermediate alternative payment systems that could better align with shariah objectives while being practically feasible.
Money has evolved over time from a barter system to increasingly abstract forms. Early currencies included commodities like grains, metals, and animals before standardized coins were developed in China and Lydia. Paper money and checks later emerged, allowing transactions to occur without physical exchange. Today, digital forms of money including credit, debit, and digital currencies perform the core functions of serving as a medium of exchange, store of value, and unit of account. Banks have facilitated transactions through checks, credit, and more recently plastic forms of money like credit cards since the development of formal banking institutions in ancient Rome.
Commercial papers and certificate of depositDharmik
1. The document provides an introduction to money markets and their role in providing short-term financing. It defines money markets as markets for lending and borrowing funds with maturity periods of up to one year.
2. The key components of money markets are discussed, including various types of short-term instruments like commercial paper, certificates of deposit, and treasury bills. Characteristics of developed versus underdeveloped money markets are also outlined.
3. The roles and importance of money markets are summarized as providing short-term financing for trade, industry, and governments while also facilitating functions of commercial banks and monetary policy implementation by central banks.
The document discusses factors that cause fluctuations in exchange rates between currencies. Exchange rates change when the values of the component currencies change due to shifts in supply and demand. Demand for a currency can increase due to greater transaction or speculative demand. Transaction demand is correlated with economic activity while speculative demand depends on interest rates. Other factors like inflation also impact exchange rates. Exchange rate fluctuations affect international trade and investment returns.
This document discusses the definition and functions of money. It begins by defining money, currency, wealth, and income. It then outlines the three main functions of money: as a medium of exchange, unit of account, and store of value. The document discusses how money is measured through various monetary aggregates (M0, M1, M2) as defined by the IMF. It also traces the evolution of payment systems from barter to various forms of currency. The key points are that money serves critical economic functions and its definition has evolved as payment systems advanced over time.
In this paper, a brief overview of the history of money will be given and principles of what make money useful in business commerce. Then, categories with electronic money will be described and bring a distinction with electronic payment systems. Next, the impact electronic money has had in general in our globalized economy will be discussed. Then, opportunities that computer science has involved in the field of electronic money will be discussed such as in data security, privacy, and traceability. In addition, drawbacks and risks involved in the use of electronic money will be discussed. Finally, a summary will be made about the future expectations for electronic money in the global market place.
The document provides an overview of the history and growth of stock markets and the information technology sector in India. It discusses how stock exchanges began in India in 1875 and have grown to include over 20 exchanges today. It also outlines the major developments in India's information technology industry, noting its significant contribution to India's GDP and exports. Key cities driving the IT sector are identified as Bangalore, Chennai, Hyderabad and others. Regulations were relaxed in 1991 to help the industry connect via satellite links and expand.
The document discusses the key aspects of a country's financial system. It defines a financial system as consisting of financial markets, intermediaries, instruments/products, and regulations that allow the flow of funds from areas of surplus to deficit. A well-organized financial system promotes economic well-being by mobilizing savings and promoting investment. The main components of a financial system are financial assets, institutions like banks and mutual funds, and markets like money markets and capital markets. Regulation is also an important aspect of any financial system.
Mengapa rupiah sulit menjadi 'unit of account' jika hanya merujuk kepada mata...Didi Sugandi
1. The document discusses the difficulty of the Indonesian Rupiah becoming a "unit of account" if it only refers to other currencies.
2. It explains that a unit of account is used to value economic items like goods, services, assets and liabilities, and is one of the main functions of money.
3. For a currency to be a strong unit of account, it needs to be backed by a commodity reserve so its value is stable and not influenced by other currencies. Linking the Rupiah to a commodity reserve like rice would reduce inflation.
The document discusses the foreign exchange market and its evolution from the gold standard to fixed exchange rates to the current floating exchange rate system. It provides details on the Bretton Woods Agreement which established fixed exchange rates between currencies from 1944 to 1971. It then describes how the US dollar became overvalued leading countries to abandon fixed rates and transition to a floating exchange rate system.
Impact of money & quasi money on the economy of Pakistansamramalik92
This document analyzes the impact of money and quasi-money on Pakistan's economy using regression analysis. Money and quasi-money are the independent variables, while GDP growth rate is the dependent variable. Regression analysis found a positive relationship between money and quasi-money (M2) as a percentage of GDP and GDP growth rate, with an R-squared value of 0.3847. The analysis concludes that as money and quasi-money levels increase, GDP growth rate also increases. Data from 1998-2015 is used in the analysis.
The document provides an overview of the foreign exchange market, including:
- It describes the market's huge trading volume, global nature, and around the clock operations.
- The main participants are large international banks and financial institutions that facilitate trading between currency dealers and other players.
- The market determines exchange rates based on factors like economic conditions, political events, and market psychology.
- It also outlines some common financial instruments in the FX market like spots, forwards, futures, options, and swaps.
This document provides information about money and its key functions through a presentation by Pratik Shukla for a macroeconomics class. It defines money and discusses its main functions as a medium of exchange, unit of account, store of value, and sometimes standard of deferred payment. Fiat money and how the money supply is comprised are also outlined. The document then contrasts money with barter systems and defines additional money functions like measuring value, acting as a medium of exchange, unit of account, standard of deferred payment, and store of value. It concludes with brief information about Sodexo as a comparison to money.
The document summarizes key concepts related to foreign exchange management. It discusses money and currency, the need for foreign exchange mechanisms when payments are made across borders, and defines foreign exchange as the process of converting one country's currency into another's. It also outlines the development of Bangladesh's foreign exchange market since 1971, regulations on dealing in foreign currency, fundamentals of management, theories of exchange rate determination including mint parity, purchasing power parity, and balance of payments theories.
Money and Banking introduction slides pptOsama Yousaf
This document discusses money and banking concepts. It defines money as anything generally accepted in exchange for goods and services, and identifies four key functions of money: medium of exchange, unit of account, store of value, and standard of deferred payment. It also discusses the money supply, functions of banks and other financial institutions, international banking, and how the banking system creates money through fractional reserve banking.
Basic Concepts of Indian Financial System: Structure and Components: Indian financial system in India, Role of
financial system in economic development. Introduction to financial Institutions – Banking – Non Banking Institutions.
Role and Functions of Banks and their Contribution to Indian Economy. Introduction to Financial Markets, Functions and
Classification. Money Market, Capital markets, Bond markets, Commodity markets, Money markets, Derivatives markets,
Futures markets, Foreign exchange markets, Crypto currency market
Specify what is included in the Money SupplySolutionAns .pdfakritigallery
Specify what is included in the \"Money Supply\"
Solution
Ans : The money supply is commonly defined to be a group of safe assets that households and
businesses can use to make payments or to hold as short-term investments.For example, U.S.
currency and balances held in checking accounts and savings accounts are included in many
measures of the money supply.
The entire stock of currency and other liquid instruments in a country\'s economy as of a
particular time. The money supply can include cash, coins and balances held in checking and
savings accounts.
In economics, the money supply or money stock is the total amount of monetary assets available
in an economy at a specific time. There are several ways to define \"money,\" but standard
measures usually includecurrency in circulationand demand deposits.
In monetary economics, circulation refers to the continuing use of individual units of a currency
for transactions. Thus currency in circulation refers to the total value of currency (coins and
paper currency) that has ever been issued minus the amount that has been removed from the
economy by the central bank. More broadly, money in circulation refers to the total money
supply of a country, which can be defined in various ways always including currency and also
including some types of bank deposits.
Demand deposits, bank money or scriptural money are funds held in demand deposit accounts in
commercial banks. These account balances are usually considered money and form the greater
part of the narrowly defined money supply of a country.
Demand deposits are usually considered part of the narrowly defined money supply, as they can
be used, via checks and drafts, as a means of payment for goods and services and to settle debts.
The money supply of a country is usually held to consist of currency plus demand deposits. In
most countries, demand deposits account for a majority of the money supply.
There are several standard measures of the money supply, including the monetary base, M1, and
M2. The monetary base is defined as the sum of currency in circulation and reserve balances
(deposits held by banks and other depository institutions in their accounts at the Federal
Reserve). M1 is defined as the sum of currency held by the public and transaction deposits at
depository institutions (which are financial institutions that obtain their funds mainly through
deposits from the public, such as commercial banks, savings and loan associations, savings
banks, and credit unions). M2 is defined as M1 plus savings deposits, small-denomination time
deposits (those issued in amounts of less than $100,000), and retail money market mutual fund
shares..
The document defines financial markets as places where trading of securities like stocks, bonds, and currencies occurs. It then discusses that financial markets facilitate raising capital, transferring risk, and matching those who want capital with those who have it. The document goes on to describe different types of financial markets like the money market, capital market, foreign exchange market, and derivatives market. It provides details on what each market involves and how they help businesses, individuals, and the economy.
The economist guide to the financial marketswijitha gayan
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Money market
1. MONEY MARKET
Money is any object or record that is generally accepted as payment for goods and services and
repayment of debts in a given country or socio-economic context. The main functions of money
are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally
in the past, a standard of deferred payment. Any kind of object or secure verifiable record that
fulfills these functions can serve as money.
Money originated as commodity money, but nearly all contemporary money systems are based
on fiat money.[4] Fiat money is without intrinsic use value as a physical commodity, and derives
its value by being declared by a government to be legal tender; that is, it must be accepted as a
form of payment within the boundaries of the country, for "all debts, public and private".
The money supply of a country consists of currency (banknotes and coins) and bank money (the
balance held in checking accounts and savings accounts). Bank money usually forms by far the
largest part of the money supply.
2. Contents
1 History
o 1.1 Etymology
2 Functions
o 2.1 Medium of exchange
o 2.2 Unit of account
o 2.3 Store of value
o 2.4 Standard of deferred payment
3 Money supply
o 3.1 Market liquidity
4 Types of money
o 4.1 Commodity money
o 4.2 Representative money
o 4.3 Fiat money
o 4.4 Currency
o 4.5 Commercial bank money
5 Monetary policy
6 See also
7 References
3. History
A 640 BC one-third stater electrum coin from Lydia.
Main article: History of money
The use of barter-like methods may date back to at least 100,000 years ago, though there is no
evidence of a society or economy that relied primarily on barter.[9] Instead, non-monetary
societies operated largely along the principles of gift economics. When barter did occur, it was
usually between either complete strangers or potential enemies.
Many cultures around the world eventually developed the use of commodity money. The shekel
was originally a unit of weight, and referred to a specific weight of barley, which was used as
currency.[11] The first usage of the term came from Mesopotamia circa 3000 BC. Societies in the
Americas, Asia, Africa and Australia used shell money – often, the shells of the money cowry
(Cypraea moneta L. or C. annulus L.). According to Herodotus, the Lydians were the first people
to introduce the use of gold and silver coins.[12] It is thought by modern scholars that these first
stamped coins were minted around 650–600 BC.
Song Dynasty Jiaozi, the world's earliest paper money
The system of commodity money eventually evolved into a system of representative
money.[citation needed] This occurred because gold and silver merchants or banks would issue
receipts to their depositors – redeemable for the commodity money deposited. Eventually, these
receipts became generally accepted as a means of payment and were used as money. Paper
money or banknotes were first used in China during the Song Dynasty. These banknotes, known
4. as "jiaozi", evolved from promissory notes that had been used since the 7th century. However,
they did not displace commodity money, and were used alongside coins. Banknotes were first
issued in Europe by Stockholms Banco in 1661, and were again also used alongside coins. The
gold standard, a monetary system where the medium of exchange are paper notes that are
convertible into pre-set, fixed quantities of gold, replaced the use of gold coins as currency in the
17th-19th centuries in Europe. These gold standard notes were made legal tender, and
redemption into gold coins was discouraged. By the beginning of the 20th century almost all
countries had adopted the gold standard, backing their legal tender notes with fixed amounts of
gold.
After World War II, at the Bretton Woods Conference, most countries adopted fiat currencies
that were fixed to the US dollar. The US dollar was in turn fixed to gold. In 1971 the US
government suspended the convertibility of the US dollar to gold. After this many countries de-
pegged their currencies from the US dollar, and most of the world's currencies became unbacked
by anything except the governments' fiat of legal tender and the ability to convert the money into
goods via payment.
Etymology
The word "money" is believed to originate from a temple of Hera, located on Capitoline, one of
Rome's seven hills. In the ancient world Hera was often associated with money. The temple of
Juno Moneta at Rome was the place where the mint of Ancient Rome was located.[14] The name
"Juno" may derive from the Etruscan goddess Uni (which means "the one", "unique", "unit",
"union", "united") and "Moneta" either from the Latin word "monere" (remind, warn, or instruct)
or the Greek word "moneres" (alone, unique).
In the Western world, a prevalent term for coin-money has been specie, stemming from Latin in
specie, meaning 'in kind'.[15]
5. MONEY MARKET
INTRODUCTION
Money market means market where money or its equivalent can be traded. Money is
synonym of liquidity. Money market consists of financial institutions and dealers in
money or credit who wish to generate liquidity. It is better known as a place where large
institutions and government manage their short term cash needs. For generation of
liquidity, short term borrowing and lending is done by these financial institutions and
dealers. Money Market is part of financial market where instruments with high liquidity
and very short term maturities are traded. Due to highly liquid nature of securities and
their short term maturities, money market is treated as a safe place. Hence, money
market is a market where short term obligations such as treasury bills, commercial
papers and bankers acceptances are bought and sold.
PURPOSE
Money Market transactions are used for the short- to medium-term investment or
borrowing of liquid funds.
FEATURES
The product types in the Money Market area are:
_ Fixed-Term Deposit
_ Deposit at Notice
_ Commercial Paper
The functions offered support the trading activities involved in preparing and entering
transactions in addition to the back office activities such as monitoring, accounting,
payment control and transaction analysis. Many steps in this process chain are
automated by the SAP R/3.
6. System and the status of a transaction can be evaluated and monitored at any time. To
access the Money Market module, proceed as follows:
Choose Accounting _ Treasury _ Treasury Management _ Money Market. The following
sections give you an overview of the Money market functions. The collective processing
function simplifies the transaction management process by displaying a list of all the
transactions with common selection criteria. From here, you simply click a button to
branch to the various processing options. To speed up processing, there is a Fast entry
function in the Money Market and Foreign Exchange areas for the most common
transactions. The Money Market area also has a Fast processing function.
The trading area also includes some Utilities:
- Date check (to determine whether the requested due date falls on a workday).
- Option price calculator, which you use to compare the option prices requested with our
own calculations based on market data (only in the Foreign Exchange and Derivatives
areas).
- Securities account cash flow in the Securities area, which displays all the flows
for a security in a particular securities account. The specific characteristics of certain
products call for other activities, which you can carry out in the trading area. These are
order execution and order expiration as well as knock-in/knock-out activities for OTC
transactions. In the Securities area, you can exercise different rights (conversion rights,
subscription rights, exercise warrants, and detach warrants).
IMPORTANCE
SOURCE OF CAPITAL
Money market is an important source of financing for trade and industry. The
short-term finances are made available through bills, commercial papers, etc.
The happenings in the money market influence the availability of finances
both for the national and international trade. Besides trade and industry,
money market offers to the government an important non-inflationary avenue
of raising short-term funds through bills that are subscribed by commercial
7. banks and the public.
IDEAL INVESTMENT
Money market offers an ideal source of investment for the commercial banks. The
market helps them invest their short-term surplus funds so as to meet statutory reserve
requirements. For instance, the requirements of Cash Reserve Ratio (CRR) and
Statutory Liquidity Ratio (SLR) vary every fortnight depending on banks’ Net Demand
and Time Liability (NDTL).
EFFECTIVE MONETARY MANAGEMENT
An efficient money market being sensitive in nature allows for the effective
implementation of monetary policy of the central bank and thus paves way for the
efficient monetary management of the country. In fact, the money market events serve
as an important guide to the government in formulation, revising and implementing its
monetary policy. This is rightly so, given the fact that the conditions prevailing in money
market serve as an indicator of monetary state of an economy. The monetary authority
uses the money market for diffusing the effects of its actions throughout the banking
system and the economy, so as to promote economic growth with stability.
ECONOMIC DEVELOPMENT
Money market being an integral part of a country’s economy, contributes substantially to
the economic development of a country. A developed money market is indispensable
for the rapid development of the economy. In fact, the stage of development of the
economy will be reflected in the stage of development of a money market. This is borne
out by the fact that ill developed nature of a money market is responsible for the
primitive nature of economic development of a country. The absence of a well-
developed money market would constrain the economies from making available, on a
8. continuous basis the supply of adequate funds.
EFFICIENT BANKING SYSTEM
The existence of a developed money market greatly facilitates the smooth and efficient
functioning of the banking and financial system. Such an advantage contributes to the
promotion of trade and industry in the economy. Further the mediating role played by
the commercial bankers ensures delivery of credit at the most opportune time. Similarly,
money market enables the commercial banks to meet much of their unexpected needs
for funds quickly and cheaply. It is possible for the commercial banks to utilize their
funds profitably and with liquidity.
FACILITATING TRADE
Money market is of immense help to the business community in the following ways:
1. Providing an ideal payment mechanism making it possible for expeditious transfer of
large sums of money.
2. Meeting the working capital requirements for carrying out the production and
marketing activities.
3. Making efficient investment of surplus funds into near-money assets which can be
quickly converted into money as and when needed.
HELPFUL TO GOVERNMENT
The government uses the money market as an arena in which short-term funds are
raised by floating treasury bills. It helps the government manage its monetary position
smoothly through the central bank of the county.
9. FUNCTIONS
INVESTMENT FUNCTION
The money market provides an ideal source for investment of the funds for a short
period of time for commercial banks, non banking financial concerns, business
corporations and other investors. It enables businessmen, with temporary surplus funds,
to invest them for a short period.
FINANCING FUNCTION
Money market provides an ideal source for short-term financing for businessmen,
industrialists, traders, etc to meet their day-to-day requirements of working capital.
Funds are available for borrowing by the government and its agencies also.
FACILITATING FUNCTION
Money market provides an ideal play ground for the central monetary authority of the
country to carry out various regulatory operations relating to the banking and financial
system of the country. The sensitive nature of the money market helps the central bank
to make it an ideal arena for the execution of various credit control measures.
TRADING USE
The trading area contains the main functions for entering financial transactions. You can
enter transactions, call up information on existing transactions, or make changes to
transactions at a later date. In the Money Market, Foreign Exchange, and Derivatives
areas, you can also give notice on and roll over transactions.
10. PREREQUISITES
You have to enter the master data before you can create a financial transaction in the
trading area. In the Money Market, Foreign Exchange, and Derivatives areas, this
means entering master data for the respective business partner in the role of Treasury
partner. Before you create a securities order, you must enter the issuer, the depository
bank, and the securities class data in the Securities area.
INSTRUMENTS
Investment in money market is done through money market instruments. Money market
instrument meets short term requirements of the borrowers and provides liquidity to the
lenders. Some common Money Market Instruments are as follows:
TREASURY BILL
Treasury Bills, one of the safest money market instruments, are short term borrowing
instruments of the Central Government of the Country issued through the Central Bank
(RBI in India). They are zero risk instruments, and hence the returns are not so
attractive. It is available both in primary market as well as secondary market. It is a
promise to pay a said sum after a specified period. T-bills are short-term securities that
mature in one year or less from their issue date.
GOVERNMENT SEQURITY
Government Securities are securities issued by the Government for raising a public loan
or as notified in the official Gazette which are issued by RBI on behalf of Govt. of India
11. (GOI). GOI uses these borrowed funds to meet its fiscal deficit, while temporary cash
mismatches are met through treasury bills of 91 days.
REPOS
The term Repo is used as an abbreviation for Repurchase Agreement or Ready
Forward. A Repo involves a simultaneous “sales and repurchase” agreements.
BENEFITS & FEATURES
1. Interest Rate Being collateralized loans, repos help reduce counter party risk &
therefore, fetch a low interest rate.
2. Contract The Repo contract provides the seller – bank to get money by partying with
its security and the buyer – bank in turn to get the security by parting with its money. It
becomes a Reserve Repo deal for the purchaser of the security. Securities are sold first
to a buyer bank and simultaneously another contract is entered in to with buyer to
repurchase them at a predetermine date and price in future. The price of the sale and
repurchase of securities is determined before entering into deal.
3. Safety Repo is an almost risk free instrument used to even out liquidity changes in the
system. Repos offer short-term outlet for temporary excess cash at close to the market
interest rate.
4. Hedge tool As purchaser of the repo requires title to the securities for the term of
agreement and as the repurchase price is locked in at a time of sale itself. It is possible
to use repos as an effective hedge-tool to arrange the others repos or to sell them
outright or to deliver them to another party to fulfill the delivery commitment in respect of
a forward or future contract or a short sale or a maturing reverse repo.
5. Period The minimum period for Ready Forward Transaction Bill will be 3 day.
However, RBI withdraws this restriction for the minimum period with the effect from
October 30, 1998.
12. 6. Liquidity Control The RBI uses Repo as a tool of liquidity control for absorbing
surplus liquidity from the banking system in a flexible way and thereby preventing
interest rate arbitraging. All Repo transaction are to be effected at Mumbai only and the
deals are to be necessary put through the subsidiary General Ledger (SGL) account
with the Reserve Bank of India.
7. Cash Management Tool The Repo arrangement essential serves as a short – term
cash management tool as the bank receive cash from the buyer of the securities in
return for the securities. This helps the banker meet temporary cash requirement. This
also makes the repo a pure money lending operation. On the maturity of the ‘repos’ the
security is purchased back by the seller bank from the buyer-bank by returning
the money to the buyer.
MONEY MARKET ACCOUNT
It can be opened at any bank in the similar fashion as a savings account. However, it is
less liquid as compared to regular savings account. It is a low risk account where the
money parked by the investor is used by the bank for investing in money market
instruments and interest is earned by the account holder for allowing bank to make such
investment. Interest is usually compounded daily and paid monthly. There are two types
of money market accounts:
Money Market Transactional Account By opening such type of
account, the account holder can enter into transactions also besides
investments, although the numbers of transactions are limited.
Money Market Investor Account By opening such type of account, the
account holder can only do the investments with no transactions.
13. MONEY MARKET INDEX
To decide how much and where to invest in money market an investor will refer to the
Money Market Index. It provides information about the prevailing market rates. There
are various methods of identifying Money Market Index like:
Smart Money Market Index It is a composite index based on intraday
price pattern of the money market instruments.
Salomon Smith Barney’s World Money Market Index
Money market instruments are evaluated in various world currencies and a
weighted average is calculated. This helps in determining the index.
Banker’s Acceptance Rate As discussed above, Banker’s Acceptance is
a money market instrument. The prevailing market rate of this instrument i.e. the
rate at which the banker’s acceptance is traded in secondary market, is also
used as a money market index.
LIBOR/MIBOR London Inter Bank Offered Rate/ Mumbai Inter Bank Offered
Rate also serves as good money market index. This is the interest rate at which
banks borrow funds from other banks.
GROWTH OF MONEY MARKET IN INDIA
ARTICLE
Capital investment is the backbone of every developing economy. It is also considered
to be one of the most important determinants of the rate of growth of an economy and
the governments in the developing countries strive very hard to ensure that the level of
capital investment is kept high. To augment the internal investment potential, the
governments in the Developing countries aim at achieving higher inflows of foreign
investment, both as FDI as well as FII.
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Economy: concept and history
Business and Economics Portal
This box: view · talk · edit
In the past, money was generally considered to have the following four main functions, which
are summed up in a rhyme found in older economics textbooks: "Money is a matter of functions
four, a medium, a measure, a standard, a store." That is, money functions as a medium of
exchange, a unit of account, a standard of deferred payment, and a store of value.[5] However,
modern textbooks now list only three functions, that of medium of exchange, unit of account,
and store of value, not considering a standard of deferred payment as a distinguished function,
but rather subsuming it in the others.[4][16][17]
There have been many historical disputes regarding the combination of money's functions, some
arguing that they need more separation and that a single unit is insufficient to deal with them all.
One of these arguments is that the role of money as a medium of exchange is in conflict with its
role as a store of value: its role as a store of value requires holding it without spending, whereas
its role as a medium of exchange requires it to circulate.[5] Others argue that storing of value is
just deferral of the exchange, but does not diminish the fact that money is a medium of exchange
that can be transported both across space and time.[18] The term 'financial capital' is a more
general and inclusive term for all liquid instruments, whether or not they are a uniformly
recognized tender.
Medium of exchange
Main article: Medium of exchange
When money is used to intermediate the exchange of goods and services, it is performing a
function as a medium of exchange. It thereby avoids the inefficiencies of a barter system, such as
the 'double coincidence of wants' problem.
Unit of account
Main article: Unit of account
A unit of account is a standard numerical unit of measurement of the market value of goods,
services, and other transactions. Also known as a "measure" or "standard" of relative worth and
deferred payment, a unit of account is a necessary prerequisite for the formulation of commercial
16. agreements that involve debt. To function as a 'unit of account', whatever is being used as money
must be:
Divisible into smaller units without loss of value; precious metals can be coined from
bars, or melted down into bars again.
Fungible: that is, one unit or piece must be perceived as equivalent to any other, which is
why diamonds, works of art or real estate are not suitable as money.
A specific weight, or measure, or size to be verifiably countable. For instance, coins are
often milled with a reeded edge, so that any removal of material from the coin (lowering
its commodity value) will be easy to detect.
Store of value
Main article: Store of value
To act as a store of value, a money must be able to be reliably saved, stored, and retrieved – and
be predictably usable as a medium of exchange when it is retrieved. The value of the money
must also remain stable over time. Some have argued that inflation, by reducing the value of
money, diminishes the ability of the money to function as a store of value.[4]
Standard of deferred payment
Main article: Standard of deferred payment
While standard of deferred payment is distinguished by some texts,[5] particularly older ones,
other texts subsume this under other functions.[4][16][17] A "standard of deferred payment" is an
accepted way to settle a debt – a unit in which debts are denominated, and the status of money as
legal tender, in those jurisdictions which have this concept, states that it may function for the
discharge of debts. When debts are denominated in money, the real value of debts may change
due to inflation and deflation, and for sovereign and international debts via debasement and
devaluation.
Money supply
Main article: Money supply
In economics, money is a broad term that refers to any financial instrument that can fulfill the
functions of money (detailed above). These financial instruments together are collectively
referred to as the money supply of an economy. In other words, the money supply is the amount
of financial instruments within a specific economy available for purchasing goods or services.
Since the money supply consists of various financial instruments (usually currency, demand
17. deposits and various other types of deposits), the amount of money in an economy is measured
by adding together these financial instruments creating a monetary aggregate.
Modern monetary theory distinguishes among different ways to measure the money supply,
reflected in different types of monetary aggregates, using a categorization system that focuses on
the liquidity of the financial instrument used as money. The most commonly used monetary
aggregates (or types of money) are conventionally designated M1, M2 and M3. These are
successively larger aggregate categories: M1 is currency (coins and bills) plus demand deposits
(such as checking accounts); M2 is M1 plus savings accounts and time deposits under $100,000;
and M3 is M2 plus larger time deposits and similar institutional accounts. M1 includes only the
most liquid financial instruments, and M3 relatively illiquid instruments.
Another measure of money, M0, is also used; unlike the other measures, it does not represent
actual purchasing power by firms and households in the economy. M0 is base money, or the
amount of money actually issued by the central bank of a country. It is measured as currency
plus deposits of banks and other institutions at the central bank. M0 is also the only money that
can satisfy the reserve requirements of commercial banks.
Market liquidity
Main article: Market liquidity
Market liquidity describes how easily an item can be traded for another item, or into the common
currency within an economy. Money is the most liquid asset because it is universally recognised
and accepted as the common currency. In this way, money gives consumers the freedom to trade
goods and services easily without having to barter.
18. Liquid financial instruments are easily tradable and have low transaction costs. There should be
no (or minimal) spread between the prices to buy and sell the instrument being used as money.
Types of money
Currently, most modern monetary systems are based on fiat money. However, for most of
history, almost all money was commodity money, such as gold and silver coins. As economies
developed, commodity money was eventually replaced by representative money, such as the gold
standard, as traders found the physical transportation of gold and silver burdensome. Fiat
currencies gradually took over in the last hundred years, especially since the breakup of the
Bretton Woods system in the early 1970s.
20. A 1914 British Gold sovereign
Many items have been used as commodity money such as naturally scarce precious metals,
conch shells, barley, beads etc., as well as many other things that are thought of as having value.
Commodity money value comes from the commodity out of which it is made. The commodity
itself constitutes the money, and the money is the commodity.[19] Examples of commodities that
have been used as mediums of exchange include gold, silver, copper, rice, salt, peppercorns,
large stones, decorated belts, shells, alcohol, cigarettes, cannabis, candy, etc. These items were
sometimes used in a metric of perceived value in conjunction to one another, in various
commodity valuation or Price System economies. Use of commodity money is similar to barter,
but a commodity money provides a simple and automatic unit of account for the commodity
which is being used as money. Although some gold coins such as the Krugerrand are considered
legal tender, there is no record of their face value on either side of the coin. The rationale for this
is that emphasis is laid on their direct link to the prevailing value of their fine gold content.[20]
American Eagles are imprinted with their gold content and legal tender face value.[21]
Representative money
Main article: Representative money
In 1875 economist William Stanley Jevons described what he called "representative money," i.e.,
money that consists of token coins, or other physical tokens such as certificates, that can be
reliably exchanged for a fixed quantity of a commodity such as gold or silver. The value of
representative money stands in direct and fixed relation to the commodity that backs it, while not
itself being composed of that commodity.[22]
Fiat money
Main article: Fiat money
21. Fiat money or fiat currency is money whose value is not derived from any intrinsic value or
guarantee that it can be converted into a valuable commodity (such as gold). Instead, it has value
only by government order (fiat). Usually, the government declares the fiat currency (typically
notes and coins from a central bank, such as the Federal Reserve System in the U.S.) to be legal
tender, making it unlawful to not accept the fiat currency as a means of repayment for all debts,
public and private.[23][24]
Some bullion coins such as the Australian Gold Nugget and American Eagle are legal tender,
however, they trade based on the market price of the metal content as a commodity, rather than
their legal tender face value (which is usually only a small fraction of their bullion value).[21][25]
Fiat money, if physically represented in the form of currency (paper or coins) can be accidentally
damaged or destroyed. However, fiat money has an advantage over representative or commodity
money, in that the same laws that created the money can also define rules for its replacement in
case of damage or destruction. For example, the U.S. government will replace mutilated Federal
Reserve notes (U.S. fiat money) if at least half of the physical note can be reconstructed, or if it
can be otherwise proven to have been destroyed.[26] By contrast, commodity money which has
been lost or destroyed cannot be recovered.
Currency
Main article: currency
Currency refers to physical objects generally accepted as a medium of exchange. These are
usually the coins and banknotes of a particular government, which comprise the physical aspects
of a nation's money supply. The other part of a nation's money supply consists of bank deposits
(sometimes called deposit money), ownership of which can be transferred by means of cheques,
debit cards, or other forms of money transfer. Deposit money and currency are money in the
sense that both are acceptable as a means of payment.[27]
Money in the form of currency has predominated throughout most of history. Usually (gold or
silver) coins of intrinsic value (commodity money) have been the norm. However, nearly all
contemporary money systems are based on fiat money – modern currency has value only by
government order (fiat). Usually, the government declares the fiat currency (typically notes and
coins issued by the central bank) to be legal tender, making it unlawful to not accept the fiat
currency as a means of repayment for all debts, public and private.[23][24]
Commercial bank money
Main article: Demand deposit
22. Demand deposit in cheque form.
Commercial bank money or demand deposits are claims against financial institutions that can be
used for the purchase of goods and services. A demand deposit account is an account from which
funds can be withdrawn at any time by check or cash withdrawal without giving the bank or
financial institution any prior notice. Banks have the legal obligation to return funds held in
demand deposits immediately upon demand (or 'at call'). Demand deposit withdrawals can be
performed in person, via checks or bank drafts, using automatic teller machines (ATMs), or
through online banking.[28]
Commercial bank money is created through fractional-reserve banking, the banking practice
where banks keep only a fraction of their deposits in reserve (as cash and other highly liquid
assets) and lend out the remainder, while maintaining the simultaneous obligation to redeem all
these deposits upon demand.[29][30] Commercial bank money differs from commodity and fiat
money in two ways, firstly it is non-physical, as its existence is only reflected in the account
ledgers of banks and other financial institutions, and secondly, there is some element of risk that
the claim will not be fulfilled if the financial institution becomes insolvent. The process of
fractional-reserve banking has a cumulative effect of money creation by commercial banks, as it
expands money supply (cash and demand deposits) beyond what it would otherwise be. Because
of the prevalence of fractional reserve banking, the broad money supply of most countries is a
multiple larger than the amount of base money created by the country's central bank. That
multiple (called the money multiplier) is determined by the reserve requirement or other
financial ratio requirements imposed by financial regulators.
The money supply of a country is usually held to be the total amount of currency in circulation
plus the total amount of checking and savings deposits in the commercial banks in the country.
In modern economies, relatively little of the money supply is in physical currency. For example,
in December 2010 in the U.S., of the $8853.4 billion in broad money supply (M2), only $915.7
billion (about 10%) consisted of physical coins and paper money.[31]
Monetary policy
23. Main article: Monetary policy
When gold and silver are used as money, the money supply can grow only if the supply of these
metals is increased by mining. This rate of increase will accelerate during periods of gold rushes
and discoveries, such as when Columbus discovered the new world and brought back gold and
silver to Spain, or when gold was discovered in California in 1848. This causes inflation, as the
value of gold goes down. However, if the rate of gold mining cannot keep up with the growth of
the economy, gold becomes relatively more valuable, and prices (denominated in gold) will drop,
causing deflation. Deflation was the more typical situation for over a century when gold and
paper money backed by gold were used as money in the 18th and 19th centuries.
Modern day monetary systems are based on fiat money and are no longer tied to the value of
gold. The control of the amount of money in the economy is known as monetary policy.
Monetary policy is the process by which a government, central bank, or monetary authority
manages the money supply to achieve specific goals. Usually the goal of monetary policy is to
accommodate economic growth in an environment of stable prices. For example, it is clearly
stated in the Federal Reserve Act that the Board of Governors and the Federal Open Market
Committee should seek “to promote effectively the goals of maximum employment, stable
prices, and moderate long-term interest rates.”[32]
24. A failed monetary policy can have significant detrimental effects on an economy and the society
that depends on it. These include hyperinflation, stagflation, recession, high unemployment,
shortages of imported goods, inability to export goods, and even total monetary collapse and the
adoption of a much less efficient barter economy. This happened in Russia, for instance, after the
fall of the Soviet Union.
Governments and central banks have taken both regulatory and free market approaches to
monetary policy. Some of the tools used to control the money supply include:
changing the interest rate at which the central bank loans money to (or borrows money
from) the commercial banks
currency purchases or sales
increasing or lowering government borrowing
increasing or lowering government spending
manipulation of exchange rates
raising or lowering bank reserve requirements
regulation or prohibition of private currencies
taxation or tax breaks on imports or exports of capital into a country
In the US, the Federal Reserve is responsible for controlling the money supply, while in the Euro
area the respective institution is the European Central Bank. Other central banks with significant
impact on global finances are the Bank of Japan, People's Bank of China and the Bank of
England.
For many years much of monetary policy was influenced by an economic theory known as
monetarism. Monetarism is an economic theory which argues that management of the money
supply should be the primary means of regulating economic activity. The stability of the demand
for money prior to the 1980s was a key finding of Milton Friedman and Anna Schwartz[33]
supported by the work of David Laidler,[34] and many others. The nature of the demand for
money changed during the 1980s owing to technical, institutional, and legal factors[clarification
needed] and the influence of monetarism has since decreased.
See also
25. Wikiquote has a collection of quotations related to: Money
Look up money in Wiktionary, the free dictionary.
Wikimedia Commons has media related to: Money
Coin of account
Currency market
Electronic money
Labor-time voucher
Leper colony money
Local Exchange Trading Systems
Money bag
Non-market economics
Numismatics — Collection and study of money
Orders of magnitude (currency)
Seignorage
Slang terms for money
Tax
World currency
Protection Systems
References
26. 1. ^ Mishkin, Frederic S. (2007). The Economics of Money, Banking, and Financial
Markets (Alternate Edition). Boston: Addison Wesley. p. 8. ISBN 0-321-42177-9.
2. ^ What Is Money? By John N. Smithin [1]. Retrieved July-17-09.
3. ^ "money : The New Palgrave Dictionary of Economics". The New Palgrave Dictionary
of Economics.
http://www.dictionaryofeconomics.com/article?id=pde2008_M000217&edition=current
&q=money&topicid=&result_number=5. Retrieved 18 December 2010.
4. ^ a b c d e Mankiw, N. Gregory (2007). "2". Macroeconomics (6th ed.). New York: Worth
Publishers. pp. 22–32. ISBN 0-7167-6213-7.
5. ^ a b c d T.H. Greco. Money: Understanding and Creating Alternatives to Legal Tender,
White River Junction, Vt: Chelsea Green Publishing (2001). ISBN 1-890132-37-3
6. ^ Boyle, David (2006). The Little Money Book. The Disinformation Company. pp. 37.
ISBN 978-1932857269.
7. ^ "On2 Money / A History of Money". pbs.org.
http://www.pbs.org/newshour/on2/money/history.html. Retrieved 2009-04-20.
8. ^ Bernstein, Peter, A Primer on Money and Banking, and Gold, Wiley, 2008 edition,
pp29-39
9. ^ Mauss, Marcel. 'The Gift: The Form and Reason for Exchange in Archaic Societies.'
pp. 36-37.
10. ^ Graeber, David. 'Toward an Anthropological Theory of Value'. pp. 153-154.
11. ^ Kramer, History Begins at Sumer, pp. 52–55
27. Conclusion
The money market specializes in debt securities that mature in less than one year.
Money market securities are very liquid, and are considered very safe. As a result, they
offer a lower return than other securities.
The easiest way for individuals to gain access to the money market is through a money
market mutual fund.
T-bills are short-term government securities that mature in one year or less from their
issue date.
T-bills are considered to be one of the safest investments - they don't provide a great
return.
A certificate of deposit (CD) is a time deposit with a bank.
Annual percentage yield (APY) takes into account compound interest, annual percentage
rate (APR) does not.
CDs are safe, but the returns aren't great, and your money is tied up for the length of the
CD.
Commercial paper is an unsecured, short-term loan issued by a corporation. Returns are
higher than T-bills because of the higher default risk.
Banker's acceptances (BA)are negotiable time draft for financing transactions in goods.
BAs are used frequently in international trade and are generally only available to
individuals through money market funds.
Eurodollars are U.S. dollar-denominated deposit at banks outside of the United States.
The average eurodollar deposit is very large. The only way for individuals to invest in
this market is indirectly through a money market fund.
Repurchase agreements (repos) are a form of overnight borrowing backed by government
securities.