chapter 5 - money and banking for BBAPresentation Transcript
1. Money and Banking Chapter 5 1
2. “If money were to grow on trees, everybody would be dealing in bananas.” 2Money and Banking
3. Before money came into existence, exchange took place through barter system. Barter occurs when people directly exchange their goods for someone else's goods.” The barter system has certain advantages: 1. Simple and reduces the complexity of the modern monetary system 2. There is no question of over/under production 3 Money is something which is generally accepted as a medium of exchange. Definition and functions money
4. Definition and functions money 3. The problem of international trade such as foreign exchange crisis, adverse BoP do not occur in barter system 4. There is no problem of concentration of economic power in the hands of few since things can not be stored for long. 4
5. Definition and functions money Difficulties of barter system: 1. Lack of double coincidence of wants 2. Absence of common measure of value 3. Lack of divisibility 4. The problem of storing wealth 5. Difficulty of deferred payments 6. Problem of transportation 5
6. Commodity money: In many countries, a number of commodities like bows, arrows, animal skins, shells, precious stones, rice, tea were used as money. The selection of commodity was dependent on factors like the location of the community, climate of the region, cultural economic development of the society. For example, community living close to sea shore chose shells, fish hooks as money. 6 Animal money: In ancient India, according to Veda, Go Dhan (cow –wealth) was accepted as a form of money. In Roman state up to 4th century BC, cow and sheep were officially recognized as money used for collecting taxes and fines. Definition and functions money Evolution and development of money
7. Definition and functions money Evolution and development of money 3....