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ContentContent1.Barter System
2. Functions of Money
3. Properties of Money
4. Types of Money
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ContentContent1.Barter System
2. Functions of Money
3. Properties of Money
4. Types of Money
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Barter SystemBarter System• In ancient times before money was invented,
people exchanged goods directly for other goods. This way of carrying out exchange is called barter.
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Inconveniences of Inconveniences of BarterBarter
• Difficulty in meeting double coincidence of wants
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• Higher cost of agreeing on an exchange ratio.
Inconveniences of Barter
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• Lack of common measure of value• Inconvenience of storing wealth
Inconveniences of Inconveniences of BarterBarter
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• A person can sell his goods for money and then keep the money for future use.
• The act of selling is separated from the act of buying
When Money Is When Money Is Used...Used...
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ContentContent1.Barter System
2. Functions of Money
3. Properties of Money
4. Types of Money
$$$
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Functions of Money
• As a generally acceptable medium of exchange
• As a store of value• As a standard of deferred payment• As a unit of account
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So, what is MONEY ?
• Money can be any asset that is generally acceptable as a medium of exchange for settling payments or debts.
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ContentContent1.Barter System
2. Functions of Money
3. Properties of Money
4. Types of Money
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Properties of MMoonneeyy
• Generally acceptable• Limited in supply • Durable• Portable• Divisible• Homogeneous
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ContentContent1.Barter System
2. Functions of Money
3. Properties of Money
4. Types of Money$ 5
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• Commodity money– has intrinsic value– e.g. cattle,silk, gold and silver
• Convertible paper money– e.g. gold and silver certificates
Types of Money
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Types of MoneyTypes of Money• Inconvertible paper money
– also called ‘Fiat Money’– simply declared by the government as
money– legal tender– e.g. notes and coins
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Types of Money
• Deposit money– Demand deposit
• current account• banks do not give any interest • not legal tender• e.g. cheque
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Types of Money
– Saving deposit• interest is paid• hold passbook to withdraw funds• not allow to withdraw more than balance
in one’s account• e.g. EPS
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Types of Money– Time (or fixed) deposits
• place one’s money with the bank for a period of time Maturity period
• interest rates are higher than those on savings deposits
– Negotiable Certificates of Deposits (NCDs)• floating interest rates• transferable
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• Electronic money– card storing some amount of cash– deducted when buy goods and services
Types of Money
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