Money and Banking

Money& Banking

Presenters

* Babar Hussain

* Junaid Ikram

* Kashif Hussain

* Rabiya Shaan

* Umer Mehmood

*

Q1: Define money and identify the different forms that it takes in the nation money supply.

MONEY

Money is an object which is commonly used and generally accepted for the exchange of goods & services. Economists have defined three different types of money. They are as follows:

1) Commodity Money: It is that type of good which had its own value and it was considered as a substitute of money.

2) Fiat Money: Fiat money is a good, the value of which is less than the value it represents as money. Money which is declared by the government to be legal for the transactions and it is issued by the government and it cannot be changed into any other form.

3) Bank Money: It plays a role by creating money in an economy.

Characteristics of Money

Portability: Money has an advantage because it is light and easy to carry and handle.

Divisibility: It is convenient for the users to divide it into smaller parts with a fixed value.

Durability: Money can be circulated frequently it is known as velocity of money. When it wears out it can be replaced with a new one.

Stability: The value of the money fluctuates but it is quite stable than the commodity or barter system.

Functions of Money

Medium of Exchange: It is commonly used as a medium for transactions on daily basis.

Store of Value: It can be used for future purchases and it doesn’t affect the condition of the money. It can be preserved for a longer period.

Unit of Account: It helps us to determine the value of every goods or services which they possess.

Role of Money Supply in Nation’s Economy

Economy of a country is often measured by m1 and m2

M1: It refers to the most liquid form of money available which can be easily spendable. Currency in circulation includes minted coins and paper currency. Current accounts are also included in it. The...