UNIT-2 Flashcards
- Q: What is money?
A: Money is anything that is generally accepted as a medium of exchange, a store of value, a unit of
What does Prof. Walker say about money?
“Money is what money does,” emphasizing its functions over its form
What are the 5 functions of money?
Medium of Exchange
Store of Value
Unit of Account
Standard of Deferred Payment
Transfer of Value
What is the ‘double coincidence of wants’?
It refers to the barter system’s requirement that both parties must want what the other has.
What is Fiat Money?
A: Money declared as legal tender by the government without intrinsic value (e.g., ₹500 note).
What is Fiduciary Money?
Money accepted on the basis of trust (e.g., cheques, demand drafts).
What is Commodity Money?
Money made of items with intrinsic value (e.g., gold, silver, grains
What is Digital or Electronic Money?
Money stored and used electronically (e.g., UPI, Paytm, Bitcoin).
What is a commercial bank?
A financial institution that accepts deposits, provides loans, and facilitates economic activity.
Name the four types of commercial banks.
Public Sector Banks (e.g., SBI)
Private Sector Banks (e.g., HDFC)
Foreign Banks (e.g., HSBC)
Regional Rural Banks (RRBs)
List any 5 functions of commercial banks.
Accepting deposits
Advancing loans
Facilitating payments
Investment services
Lockers and safekeeping
What is the main function of commercial banks?
Banks borrow to lend” – they accept deposits and provide loans.
What are the major types of deposits in banks?
Savings Deposits
Current (Demand) Deposits
Fixed (Time) Deposits
Recurring Deposits
What is a cheque?
A written order directing a bank to pay a specified amount to a named person/entity.
What is a demand draft?
A prepaid instrument used for secure fund transfers, guaranteed by the issuing bank.
What is a credit card?
A card that lets you borrow money from the bank up to a limit for purchases or withdrawals
What is internet banking?
Banking services conducted online via a computer or mobile, 24/7.
What is mobile banking?
Using a mobile app to access banking services like UPI transfers, bill payments, and balance checks.
What is digital currency?
Currency that exists only in electronic form and can be centralized or decentralized.
Q: What is cryptocurrency?
A decentralized digital currency using cryptography and blockchain tech(e.g., Bitcoin, Ethereum).
Who created Bitcoin and when?
Satoshi Nakamoto in 2009.
What is credit creation?
The process by which banks expand the money supply by lending a portion of deposits.
Q: What is the credit multiplier formula?
1 / CRR (Cash Reserve Ratio)
What’s the role of the central bank in credit creation?
It sets reserve requirements and regulates the process to maintain financial stability.
