this doc has a easy explaination of all the necessary topics ,and will save you a lot of time and efforts .it has topics like barter system ,function of money ,centrial bank ,RBI,monopoly of note issue ,bank of the governement ,quantitative and qualitative methods ,value of the currency ,demand for...
The need to facilitate exchange of goods led to evolution of
money. Money has passed through different stages of evolution
like commodity money, metallic money, paper money and bank
money. Money is the most important invention of modern times. It
has undergone a long process of historical evolution. The first
stage of evolution of money was Barter System.
MEANING OF BARTER SYSTEM/ BARTER EXCHANGE:-
Direct exchange of goods against goods without the use of money
is called as barter exchange. Barter as a system of exchange
could not be continued for long due to the following problems or
inconveniences.
INCONVENIENCES OR PROBLEMS OF BARTER SYSTEM:-
1. Lack of double coincidence of wants:
Barter system requires double coincidence of wants. This is a
situation where what one person wants to sell and buy must
coincide with what some other person wants to buy and sell.
Simultaneous fulfillment of mutual wants by buyers and
sellers is known as double coincidence of wants. This is not
possible hence this system of exchange had to be given up.
2. Lack of common measure of value:-
Unlike money goods exchanged under barter do not have a
common measure of value. Few commodities exchanged
were of higher value than the others this created a lot of
difficulties.
, There was absence of a common denominator like money
which provided different prices to different articles.
3. Difficulty in storing value:-
Goods of barter trade like cattle, wheat, potatoes, rice could
not be stored for long like money. They are perishable.
4. Lack of divisibility:-
Goods exchanged in barter were of unequal value, for
example a household wants to sell his cow and get cloth in
exchange equal to the value of half the cow,he cannot do so
without killing the cow. Thus, lack of divisibility of goods
makes barter exchange impossible.
5. Lack of portability:-
The goods exchanged in barter were bulky, it was difficult to
move these goods from one place to another for the purpose
of exchange.
MEANING OF MONEY:-
Money is anything that is commonly accepted as a medium
of exchange.
or
Walker ---“ Money is what money does” .
FUNCTIONS OF MONEY:-
1. Medium of exchange:-
Money acts as a medium of exchange, it helps in the
elimination of the limitations of barter trade. Individuals
can exchange their goods and services for money and
with money they can buy any good or a service.
2. Money acts as a convenient unit of account/ it acts as a
common measure of value:-
Money acts as a common denominator into which the
values of all goods and services could be expressed. Let
us examine how money acts as a convenient unit of
account. The value of all goods and services can be
, expressed in monetary units. When we say that the value
of a certain wrist watch is Rs. 500 we mean that the wrist
watch can be exchanged for 500 units of money, where a
unit of money is rupee in this case. If the price of pencil is
Rs. 2, and that of pen is Rs. 10, we can calculate the
relative prices of pen with respect to pencil. Thus if the
prices of all commodities increase there will be a general
increase in the price level and fewer commodities can be
purchased.
3. Standard of deferred payments:-
Credit has become the life and blood of modern
economics. Millions of transactions are conducted and
payments are made at a later date, this is possible
because money is stable and durable.
4. Store of value:-
Money can be stored or saved without loss of value.
Money can be saved and can be used at a later date. This
function of money bridges a gap between the present and
the future.
TOWARDS A CASHLESS SOCIETY:-
Many countries have made an attempt to move towards
the use of less cash and more of digital transactions. The
ultimate motive of most of the countries is to have
cashless societies where financial transactions are not
connected with money in the form of physical bank notes
or coins but through the transfer of digital information
(using an electronic representation of money), between
the transacting parties. The Indian Government is
continuously investing in various reforms for greater
financial inclusion. In the last few years initiatives like Jan
Dhan accounts, Adhar enabled payment systems, e-
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