Money Flashcards
What is barter system?
It is a system in which, good were directly exchanged for other goods without the use of money
what’re the disadvantages of Barter system? (6 points)
- Problem of reciprocal demand.
- Indivisibility.
- Complex calculations
- Problems related to deffered (future) payments.
- Problems related to store of value.
- Inadequate scope of specialisation
Walker’s definition?
Money is what money does
“Anything that is generally acceptable as a medium of exchange and at the same time acts as a measure and store of value” Whose definition is this?
Crowther and Crowther’s definition
What is commodity money?
When various commodities are used as money, it is called commodity money. eg: cowrie shells, leather, animal hides, animals
What is Metallic money?
The use of precious metals as money is called metallic money.
What is Legal tender or Fiat money?
When the acceptability of any medium of exchange is enforced by law, that medium is called fiat money or legal tender
What is plastic money?
Credit cards, debit cards
What is numeraire?
The good in terms of which the value or price of all other goods is expressed is called numeraire
Primary Functions of money (2 points)
- Acting as medium of exchange
2. Acting as measure of value.
Secondary functions of money (3 points)
- Standard of deffered payment
- Store of value
- Transfer of value
Contingent functions of money (4 points)
- Assisting production decisions
- Assisting consumption decisions
- Assisting distribution of normal income
- Assisting the operation of a credit system
Components of money supply
M1 = Currency with the public + demand deposits with the commercial banks + other deposits with the RBI M2 = M1 + postal savings bank deposits M3 = M1 + term deposits with the commercial banks
What is Narrow and Broad money?
Narrow Money is M1
Broad Money is M3
What is M1?
Currency with the public + Demand deposits with commercial banks + other deposits with the RBI
What is M2?
M1 + Postal savings bank account
What is M3?
M1 + Term deposits with the commercial banks
……………………. is the most primitive form of money
Commodity money
Who introduced the first gold coin and when?
King Kanishka of Kushan Dynasty during the 1st century A.D
What is paper money also called?
Standard money
Barter system cannot function well because of ……………….. (4 Options)
(A) Goods are not always divisible
(B) Transaction costs are minimal
(C) goods are always standard
(D) None of the above
Option A is the right answer
Paper currency is known as Fiat money because ……………….
it is a decreed legal tender
Give an example Digital Banking ………………..
ATM card
What eliminates the need for double coincidence of wants ?
Money
Since money acts as an intermediate in the exchange process it is called as ……………………
medium of trade or exchange
What were the earliest forms of objects used as money in India?
Grains and Cattle
What came after grains and cattle as medium of exchange in India ?
metallic coins
What came after metallic coins as medium of exchange in India ?
paper money
What is paper money also called?
token money
The meaning of money supply is ............... (A) money deposited in the bank (B) cash available with public (C) saving in the post office (D) all the above
(D) all the above
Option D is correct
When is credit needed?
When we cannot pay for a commodity now
It is often said, “Money is a matter of functions four……..” What are those four functions?
A medium, a measure, a standard and a store
What are the qualities of a good monetary system?
1) It should be acceptable to all and act as a medium of exchange
2) it should be easily used to measure the values of different quantities of goods and services
3) it should be effectively used as a standard of deferred payment
4) it should also be used easily as a store of value
Who issues the coins and one-rupee notes in India?
Finance Ministry of India
Who issues the other paper notes in India?
The Reserve Bank of India
What are those deposits which can be withdrawn at any time called?
Demand Deposits
What are demand deposits also called?
Current account deposits
………………………….. plus ………………………………. are the most widely accepted measure of money supply
currency + demand deposits or M1
