1. Money & Banking
1.Introduction and Meaning
2.Definition
“ Controversial Issue”
“Any commodity that is generally
accepted as a medium of exchange
and a measure of value.”
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2. 3.Functions of Money (182)
“Money is matter of functions four,
A medium, a measure, a standard & store.”
4.Significance of money
in a modern economy (184 -186)
i. Eliminates Problems of Barter System.
ii. Works as a Factor of Production.
iii.Accelerates Pace of Production & Growth.
iv.Lifeblood of a Modern Economy.
v. Other Contributions.
- Consumers’ Choices.
- Money Market & Credit System.
- Efficient Allocations of Financial Resources
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3. 5. The Supply of Money.
i) Sources of Money Supply
-‘A high power money’
-‘Credit Money’
-‘Non-Banking Financial Institutions (NBFIs)
ii) Measures of Money Supply in India
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4. 6.RBI Measures of Money Supply
Four Measures
i M1 = C + DD + OD
ii M2 = M1 + Savings Deposits With POs
iii M3 = M2 + Net Time Deposits With CBs
iv M4 = M3 + Total Deposits With Pos (NSCs)
where,
C =Currency held by the public
DD = Net Demand Deposits With CBs
OD = Other Deposits With RBI
NSCs =National Savings Certificates
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5. 7.Demand for Money
Quantity Theory of Money
A)Fisherian Approach
Irving Fisher
Money as ‘Medium of Exchange.’
MV= PT
B)Cambridge Approach
A C Pigue, D R Robertson & J M Keynes
Money as ‘Store of Value.’
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6. Md=KPY
Md = DD for Money
K = Proportionality factor
PY = Nominal National Income
C) Keynesian Approach
Three Motives
i) Transactions Motive - Active
ii) Precautionary Motive- Idle
iii)Speculative Motive- Idle
INTEREST RATES6
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