Money Flashcards
_____ is the foundation stone around which all economic activities revolve/most imp discovery/basic necessity of all economies
money
What is barter exchange?
exchange of goods for goods
What is Barter economy? What is another name for it?
economy where there is a direct barter of goods and services
c-c economy
What is double coincidence of wants?
it refers to the simultaneous fulfillment of mutual wants of buyers and sellers
What are the limitations of barter exchange?
lack of double coincidence of wants
lack of common measure of value
lack of standard deferred payment
lack of store of value
future payments cannot take place at ease because of _____
can be a different quality
can be a different specific commodity
can lose or gain value
What is the definition of money?
money is anything which is generally accepted as a medium of exchange, measure of value, store of value and means for standard of deferred payment
What is money supply?
total vol. of money held by public at a particular point of time in an economy
What are the features of money supply?
stock concept
money held by the public only - individuals and business firms
RBI used narrow measure of money ss till _____
1967-68
4 alternative measures of money ss were evolved since _______
1977
Explain M1
Currency and Coins with Public + Demand Deposits of Commercial Banks + Other Deposits with RBI
currency and coins with public - legal tender money / fiat money
demand deposits - savings a/c and current a/c
other deposits - very small portion of M1, deposits of foreign banks, govts, public financial institutions, IMF etc (doesnt include commercial bank deposits)
Explain M2
M1 + Savings Deposits with Post Office Savings Bank
Explain M3
M1 + Net Time Deposits with Banks
Explain M4
M3 + Total Deposits with Post Office Savings Bank
What is legal tender money?
money which can be legally used to make payment of debts or other uses
What is fiat money?
defined as the money which is under the fiat or order from govt to act as money i.e under law
What is High-Powered money?
money produced by RBI and the govt
(i) currency held by public
(ii) cash reserves with the banks
What is the difference btwn money and high-powered money?
Money - currency and demand deposits
H-P money - currency and cash reserves with banks
cash reserves serves as a base for
generation of demand deposits
How is M2 evolved?
savings deposits with post office savings bank is not withdrawable by cheque so they’re not part of dd deposits with banks
What is NSC? Is it part of M4?
National Savings Certificate
it is not a part of M4
What is the most and least liquid of the four measures?
M1 - most liquid
M4 - least liquid
What is also called transaction money?
M1
What is also called the aggregate monetary resources of the society?
M3
