Some define money as anything acceptable I payment of goods and services or in settlement of debt Some say money is anything that performs the function of medium of exchange measure of value and store of value ID: 1029244
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1. Definitions of MoneyThere is no commonly acceptable definition of moneySome define money as anything acceptable I payment of goods and services or in settlement of debt. Some say money is anything that performs the function of medium of exchange, measure of value and store of value .Johnson has given four approaches to define the concept of money :
2. Approaches of money ApproachesConventional ApproachChicago ApproachGurley and Shaw ApproachCentral Banking or Redcliffe Approach
3. 1. Conventional ApproachIn this approach money is defined on the basis of its functions. “ Money is what money does.”In words of R P Kent, “ Money is anything that is commonly used and generally accepted as a medium of exchange or as a standard of value.”Geoffry Crowther says, “ Money can be defined as anything that is generally acceptable as a mean of exchange and at the same time acts as a measure and store of value.”Gist of this definition: Money= Notes +coins + Demand Deposits
4. 2. Chicago ApproachGiven by Nobel Laureate Friedman. He says, “ Money is temporary abode of purchasing power.”In monetary economy, every transaction has two aspects: sale and purchase. It is essential to hold purchasing power in terms of money till such time the transaction is performed. So Money= Currency+ Demand Deposit+ Time DepositThis definition widened the scope of concept of money
5. 3. Gurley and Shaw ApproachThis approach says money should include all instruments which are close substitute of each other.So Money= Currency+ DD +TD +Savng Bank Deposit +Shares +Bonds +……..Credit instruments issued by financial intermediaries –banking and no-banking and thrift societies like LIC, Saving Bank etc have high quality of liquidity. So these should be also included in money.
6. 4. Central Banking or Redcliffe ApproachThis approach also includes credit in the definition of money. So credit extended by NBFI including unorganized institutions is also included in definition of money.Money= Currency+ DD+ TD+ Saving Deposit+ Shares+ Bonds+ Securities+ Credit from unorganized sector
7. Characteristics of MoneyGeneral acceptabilityVoluntary AcceptabilityMedium of ExchangeMoney is a mean not an endGovernment controlLiquid AssetMoney is not a veil
8. Functions of Money Functions of MoneyPrimary FunctionsSecondary FunctionsContingent FunctionsStatic and Dynamic function
9. Primary FunctionsSecondary FunctionsMedium of ExchangeMeasure of ValueStandard of Deferred PaymentsStore of ValueTransfer of valueFunctions of money
10. Contingent FunctionsStatic and Dynamic FunctionsBasis of Credit CreationMaximum SatisfactionDistribution of National IncomeBearer of optionGuarantee of SolvencyIncrease in the liquidity of capitalStatic FunctionsDynamic functionsFunctions of Money
11. Direct importance in the field of EconomicsIndirect importance in the field of EconomicsIn consumptionIn productionIn exchangeIn tradeIn distributionIn public financeCapital formationFreedom from barterSolution of Central Economic problemsBasis of CreditIndex of Economic DevelopmentIncrease in mobility of capitalMeasure of social welfareNational and international unityImportance of Money
12. Economic EvilsSocial EvilsInstability of valueTrade cyclesOver- CapitalizationEconomic wastageUnequal distribution of wealthProblem of black moneyEncourages materialismTendency of ExploitationIncrease in immoral tendenciesDisadvantages of Money