Money

WHAT IS MONEY SUPPLY? The supply of money ia a stock at a particular point of time. It is synonymous with terms as "money stock", "quantity of money" etc.  The supply of money at any moment is the total amount of money in the economy. DETERMINANTS OF MONEY SUPPLY The determinants of money are:- 1) The Required Reserve Ratio- It is an important determinant of money supply. An increase in the required reserve ratio reduces the supply of money with commercial banks and a decrease in required reserve ratio increases the money supply. 2) Public's Desire To hold Currency and Deposits- It also determines the money supply.If people are in the habit of keeping less in cash and more in deposits with the commercial banks, the money supply will be large. On the contrary, if people do not have banking habits and prefer to keep their money holdings in cash, credit creation by banks will be less and the money supply will be low. 3) High-Powered Money-...

The law is named after Sir Thomas Gresham (1519-79), a leading English business pay on and financial adviser to Queen Elizabeth I. It states that if two coins are in circulation whose relative face values differ from their relative bullion content, the ‘dearer’ coin will be extracted from circulation for melting down. ‘ Bad Money Drives out Good ’.  In India, we have one-rupee notes and one-rupee coins. Both are forms of legally good money. Yet, the public sometimes prefer one form of a particular denomination to ano­ther, e.g., they may prefer the rupee coin to the paper note. If there is such a preference for one form of money rather than another, it is an example of Gresham’s Law in operation. In short, the principle suggests that “bad money tends to drive good money out of cir­culation when both are full legal tender”. This principle is known as Gresham’s Law. The term  “bad money”  does not mean coun­terfeit coins. It means worn out, clipped or underweigh...

Money has been classified by different economists. Important classifications of money are explained below:- 1) MONEY PROPER AND MONEY ACCOUNT- Money Proper or Actual Money is the money which is in circulation in a country.  It is the medium of exchange and means of payment. In India, for eg. The rupee note and the rupee coin are the actual money. Money of Account is that in which account are maintained.  Prices of goods and services, general purchasing power, debts, etc., are all expressed in terms of money of account. 2) COMMODITY MONEY AND REPRESENTATIVE MONEY:- Commodity Money is made of certain metal and it's face value is equal to its intrinsic value. It is also called full-bodied money. The Money Proper in circulation which is not full-bodied is called Representative Money. It is a money whose value is materially greater than the value of the stuff of which it is composed . Paper currency notes are an example. 3) LEGAL TENDER AND OPTIONAL MONEY:- Legal Tender ...

Money performs a number of primary, secondary and contingent functions which not only remove the difficulties of barter system but also oils the wheels of Trade and industry in the present Day World. (A) PRIMARY FUNCTIONS:- The two primary functions of money are To Act as a Medium of Exchange and as a Unit of Value. 1) Money as a medium of exchange:-    Money, as a medium of exchange, means that it can be used to make payments for all transactions of goods and services. It is the most essential function of money. Money has the quality of general acceptability so, all exchanges take place in terms of money. This function has removed the major difficulty of lack of double coincidence of wants and inconveniences associated with the barter system. It  facilitates trade and helps in conducting transactions in an economy. Money has no power to satisfy human wants, but it commands power to purchase those things, which have utility to satisfy human wants. 2) Money as a me...

Money  is any item or verifiable record that is generally accepted as  payment  for  goods and services  and repayment of  debts , such as  taxes , in a particular country. It has been defined differently by different economists. While some economist like WALKER has defined money in terms of the functions,  others like KEYNES, COLE, ROBERTSON, etc., have emphasized on the general acceptability aspect of it. To serve as money, the definition of money should be comprehensive enough to cover all the essential functions that money performs in the economy.  Definitions of Money: Money is one such concept which is very difficult to be restricted to some well-defined set of words. It is very easy to understand but difficult to define. Still, a large number of economists have given variety of definitions, some definitions are too extensive while others are too narrow. Various economists like Prof. Walker, Robertson, Seligman, etc., have use...