7️⃣
money
Meaning of money (2marks)
.The word money is derived from the latin word Moneta
which was the surname of the roman goddess of Juno in
whose temple at Rome , money was coined.
.money is any good that is widely used and accepted in
making transactions
Definition of money (2)
. Money may be defined as anything which is generally acceptable as a
medium of exchange and at the same time act as measure and store of
value.
functions of Money
2. Measure of value:
Primary Functions
Money measures the value of all goods
these are the basic functions and services . it acts like a common
measure of value. measure of value refers
money 1
common to all countries during all to the monetary expression of the market
periods value of goods and services.
also called fundamental function acts as a standard measure into which the
values of goods and services are
1.Medium of exchange expressed. when a commodity is expressed
in the terms of money it is called
2. Measure of value
price.Money thus enables people to
1. Medium of exchange : compare prices of different goods and
services.
→ medium of exchange is the most
important function of money . Money also serves as a unit of account .
→Money is acceptable to all as a medium —> unit of account is a standard
of echange. a person can sell his goods and numercial unit of meaurement of market
services in exchange of money and can use goods and services.
this money for buying goods and services as a unit of account it helps in developing
he needs.Thus money acts as the efficient accounting system because the
intermediary for exchange of goods and values of a variety of goods and services
services. which are physically measured in
→ All purchases or sales are made through different units can be added up .
money.since money is generally it provides a basis for keeping accounts,
accepted,everyone accepts it in exchange of estimating national income calculating
goods and services .Thus it removes the profit and loss,costing etc
difficulty of barter system by eliminating
the need for double coincidence of wants
Money serves as a proper medium of
Secondary functions
exchange because:
1. Standard of deferred payment
1. Money has general acceptability. 2. Store of value
2. Money is easily divisble for small and 3. Transfer of value
large transactions
3. money is easy to transport.
1.Standard of deferred payment 2. Store of value.
Money serves as a standard of —>Store of value means store
deferred payment. of wealth for future use i.e
deferred payments are those shifting of purchasing power
money 2
payments which are to be made from the presesnt to the future.
in the future. —> money is not perishable
in a modern economy , a large and its storage costs are also
number of transactions which considerably lower .it
can be easily stated in terms of acceptable to anyone at any
money point of time.
—> Money enables the ppl to
3 . Transfer of Value save a part of their current
—> Money also serves as
income and store it for future
transfer of value. —→money use. thus , money provides the
can be transferred easily from : link between the present nd the
i) one place to another
future .
ii) one person to another store of value function of money
—> an individual who has
is also known as asset function
money has purchasing power of money.
and he/she can transfer this
purchasing power to anyone by
transferring the money.
Contingency functions (7
mark)
Maximization of utility maximisation of profit
money helps the CONSUMERS in money helps the producers in deciding
maximising their satisfaction while what qty of different factors of
purchasing various goods and services production to be employed. every
producer wants profit maximisation
a consumer will be able to maximise
while employing various factors of
his satisfaction by estimating prices of
production
goods and their manual utilities.
a producer to maximise his profit
equates marginal productivity (
money 3
expressed in value terms) of a factor
with its price or rate of renumeration is
expressed in terms of money.
Distribution of national Basis of Credit
income in modern econocomic system, credit
money facilitates the distribution of plays a key role and money constitutes
national income among people . total as the basis of credit.
output of a country is jointly produced credit instruments like cheques,
by different factors of production. so drafts,bills of exchange cannot be used
this will need to be distributed among without the existence of money.
them
Money helps in the distribution of
national income through the system of
factor prices i.e wages, rent, ineterst,
profit which r expressed in money
terms.
money 4
