content 1.barter system 2. functions of money 3. properties of money 4. types of money

ContentContent1.Barter System

2. Functions of Money

3. Properties of Money

4. Types of Money

ContentContent1.Barter System

2. Functions of Money

3. Properties of Money

4. Types of Money

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.

Inconveniences of Inconveniences of BarterBarter

• Difficulty in meeting double coincidence of wants

• Higher cost of agreeing on an exchange ratio.

Inconveniences of Barter

• Lack of common measure of value• Inconvenience of storing wealth

Inconveniences of Inconveniences of BarterBarter

• 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...

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

So, what is MONEY ?

• Money can be any asset that is generally acceptable as a medium of exchange for settling payments or debts.

ContentContent1.Barter System

2. Functions of Money

3. Properties of Money

4. Types of Money

Properties of MMoonneeyy

• Generally acceptable• Limited in supply • Durable• Portable• Divisible• Homogeneous

ContentContent1.Barter System

2. Functions of Money

3. Properties of Money

4. Types of Money$ 5

• Commodity money– has intrinsic value– e.g. cattle,silk, gold and silver

• Convertible paper money– e.g. gold and silver certificates

Types of Money

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

Types of Money

• Deposit money– Demand deposit

• current account• banks do not give any interest • not legal tender• e.g. cheque

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

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

• Electronic money– card storing some amount of cash– deducted when buy goods and services

Types of Money