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Module 7
MONEY

2.
MONEY
"Money is the promisory instrument, issued by
the Government to facilitate the exchange
transactional process in commercial or
rewarding or penalizing"
Money came into existence from the barter
system to exchange of metals and presently
each country has their own currency as a
medium of exchange to facilitate their citizens
as well as others for commercial or social
transactions.
Money has STATIC AND DYNAMIC functions

3.
MONEY
The STATIC functions of Money:
1. Medium of exchange,
2. Has a value and a unit of account,
3. It can be in paper, metal or bank instrument.
4. Declared by the Govt as a legal tender.
5. It can be used as a standard of deferred
payments.

4.
Functions of Money
The DYNAMIC function of Money are:
1. Money can determine 'Economic Trend'.,
2. Money can influence, 'Consumption and
Production'.,
3. Money states the, 'Purchasing Power' and
acts as a medium of exchange.

5.
FEATURES OF MONEY
Features of Money:
1. Money should be durable, it should not get
easily decomposed or degraded.,
2. Money should be divisibility, it should be
available in fractions, Re1 to Rs 1000 which
permits citizens to divide as they want.,
3. Money should be handy, easily
transportable.,
4. Money should be far from duplicacy. If
currency can be duplicated, it will loose its
value.

6.
CLASSIFICATION OF MONEY
Money can be classified into:
1. Monetary System Criterion or Physical
characteristics,
2. Acceptability Criterion,
3. Money of account and Money Proper,
4. Other types of money

7.
CLASSIFICATION OF MONEY
Money can be classified into:
1. Monetary System Criterion or Physical
characteristics,:
Money can be in Paper Form or Metalic Form,
where both has their limitation in the exchange
process.

8.
CLASSIFICATION OF MONEY
Money can be classified into:
2. Acceptability Criterion,:
Money can be in the form of legal tender
money that is which individuals use for
exchange to buy or sell, while the other is the
optional money or non legal tender money,
which are also called as 'BANK MONEY"
(Cheques or Drafts).

9.
CLASSIFICATION OF MONEY
Money can be classified into:
3. Money of account and Money Proper,:
Keynes distinquished between money of
account and money paper, where money of
account is the transactions pertaining to
purchasing power while Money Proper is the
specific currency where the settlement is done,
for instance, Indian Rupees.

10.
CLASSIFICATION OF MONEY
4. Other Types of Money, :
a. Commodity Money (Based on products value),
b. Fiat Money: (Based on value by Govt Ex: Gold),
c. Credit Money: (Based on Credit or Financial Instruments of an individual),
d. Soft Money: (Based on promise by Govt for exchange and is issued in
the form of paper),
e. Hard Money: (Based on the value of commodity Ex: Gold is a hard
money),
f. Commercial Bank Money (Based on finalization by the bank)
g. Digital Money: (Money in the Electronic Form),
h. Fiduciary Money: (Legal or Ethical relationship of trust between 2
parties)

11.
MONEY SUPPLY
Money Supply (M) = M1 + M2 + M3 + M4
Where:
M1 = Currency with Public + Demand Deposit
with Banking System + Other deposit with RBI,
M2 = M1 + Savings Deposits at Post Offices,
M3 = M1 + Time Deposites in Banks,
M4 = M1 + All deposites in PO Savings,
excluding NSC (National Savings Certificates)

12.
CREDIT CONTROL
Credit Control is the tool used by the RBI, to
control the demand and supply of Money
(Liquidity). Credit Control is the method used by
RBI to 'Bring Economic Development with
Stability'.
Meaning: Credit Control refers to the process
of monitoring and collecting the money owned
to a business. This includes the measures and
procedures adopted by a firm to ensure that its
credit customers pay their accounts.

13.
CREDIT CONTROL
Objectives of Credit Control:
● To encourage overall growth of the priority
sector,
● To keep a check on channelization of credit,
● To control inflation and deflation,
● To boost the economy with adequate flow of
credit to various sectors,
● To develop the economy.

14.
CREDIT CONTROL
Methods to measure the credit control are
as follows:
● Quatitative Method,
● Qualitative Method.
(Take down the same points How RBI takes
measures to control the Money Supply in the
market)