BEC3-U5 Money Finance.ppt

BEC3-M5 Money and Finance Contents Major currencies in the world What is Money Money is anything that is generally accepted as payment for goods and services. The main uses of money are as a medium of exchange, a unit of account, and a store of value. What are the functions of money? Medium of exchange A unit of account: measuring the value of goods and services A temporary store of value Features with 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. Origin of Money Barter ? no agreement on offering or how much one was worth in terms of another; Valuable metals; Government melt down valuable mental into coins; Paper notes: banknotes Intangible money The Functions of Money Medium of exchange – people are willing to change their goods and services for money; A store of value – people are willing to hold on to money because it generally keeps its value (although not with inflation); Unit of account – people can measure the value of things in terms of money; Medium of exchange Money is used as an intermediary for trade, in order to avoid the inefficiencies of a barter system, which are sometimes referred to as the double coincidence of wants problem. Such usage is termed a medium of exchange. Unit of account A unit of account is a standard numerical unit of measurement of the market value of goods, services, and other transactions. It is also known as a measure or standard of relative worth and deferred payment. Divisible into small units without destroying its value; precious metals can be coined from bars, or melted down into bars again. Store of value To act as a store of value, a commodity, a form of money, or financial capital must be able to be reliably saved, stored, and retrieved — and be predictably useful when it is so retrieved. Sight deposits – deposits at b