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Introduction
Lets talk about money.
Firstly in ancient times there was no money i.e people use to buy and trade goods by exchanging other goods with the goods they want this system was known as barter exchange. It was known as C-C economy, C stands for commodity.
Limitations of barter exchange
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Lack of double coincidence of wants
This barter system can only work when both the buyers and seller are ready to exchange each other goods.Lack of common measure of value
In the barter system the commodities can be of different value and there is no common measure of value of these goods. In which they can be expressed.
- Lack of standard deferred payment
Under barter thr contract involving future abd credit transaction cannot take place with ease.
- Lack of store value
Under this system it was difficult for people to store wealth for future because most of the goods do not possess durability. And storing them required time and efforts.
Defination of money
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Money is anything which is generally accepted as a mode exchange measure of value store of value and means for standard of deferred payment.
Legal defination of money
According to this the money is what the laws say is money. So anything which the government declares as money is Money.
1.legal tender money: money which is generally use to make payments and pay off debts or other obligations is termed as legal tender money.
- Non legal tender money: it is a form of money which is generally accepted but legally one is not bound to accept it.
Money supply
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Money supply refers to total volume of money held by public at a particular point of time in an economy.
Components of money supply
Currency with public
It consists of paper notes and coins held by the public. It is the most liquid of all assets and includes coin of 10,5,2,1 etc and paper notes of 2000,500,200,100 etc.Demand deposits with bank
It refers to money deposit by public in the bank they can be encashed by issuing cheques at any time by account holders.
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