Money And Banking

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Money and Banking



Money:
Term that actually refers to two concepts: the abstract unit of account in terms of which the value of goods, services, and obligations can be compared; and anything that is widely established as a means of payment. Frequently the standard of value also serves as a medium of exchange, but that is not always the case.



The role of money in the society:

A first definition of money is to define money as the mean of exchange between individuals. In a capitalist economy, this is a too simple definition. The fundamental purpose of money is a way to distribute the ownership in the society. And, by a consequence, money is also used as a mean of exchange. Furthermore, it should be analyzed that money is also a social instrument which help to coordinate social relation between individuals.



Functions of Money:
? Specific functions (mostly micro-economic)
č Unit of account (abstract)
č Common measure of value (abstract)
č Medium of exchange (concrete)
č Means of payment (concrete)
č Standard for deferred payments (abstract)
č Store of value (concrete)
? General functions (mostly macro-economic and abstract)
č Liquid asset
č Framework of the market allocative system (prices)
č A causative factor in the economy
č Controller of the economy


Properties or Characteristics of Money:

Any item which is going to serve as money must be:

acceptable to people as payment

scarce and in controlled supply

stable and able to keep its value

divisible without any loss of value

portable and not too heavy to carry



Banking:

Banks are financial institutions that accept deposits from citizens and pay interest in return. Banks are not all service institutions, most operate in order to make a profit. Even if they are a non profit they do have to make money in their operation in order to pay expenses.



Functions of Ba...