Content
1.Barter System
2. Functions of Money
3. Properties of Money
4. Types of Money
Content
1.Barter System
2. Functions of Money
3. Properties of Money
4. Types of Money
Barter 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 Barter
• Difficulty in meeting double coincidence of
wants
Inconveniences of Barter
• Higher cost of agreeing on an exchange ratio.
Inconveniences of Barter
• Lack of common measure of value
• Inconvenience of storing wealth
When Money Is Used...
• 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
Content
1.Barter System
$$$
2. Functions of Money
3. Properties of Money
4. Types of Money
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.
Content
1.Barter System
2. Functions of Money
3. Properties of Money
4. Types of Money
Properties of Money
•
•
•
•
•
•
Generally acceptable
Limited in supply
Durable
Portable
Divisible
Homogeneous
Content
1.Barter System
2. Functions of Money
3. Properties of Money
$5
4. Types of Money
Types of Money
• Commodity money
– has intrinsic value
– e.g. cattle,silk, gold and silver
• Convertible paper money
– e.g. gold and silver certificates
Types 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
Types of Money
• Electronic money
– card storing some amount of cash
– deducted when buy goods and services