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Monetary system

www.IMSciences.net. Monetary system. Review. Barter System. Barter System Means the direct exchange of goods for goods. The direct exchange of surplus commodity for commodity with another person without the use of money. Inconveniences of Barter System. Double Coincidence Of Wants

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Monetary system

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  1. www.IMSciences.net Monetary system Review

  2. Barter System • Barter System Means the direct exchange of goods for goods. The direct exchange of surplus commodity for commodity with another person without the use of money.

  3. Inconveniences of Barter System • Double Coincidence Of Wants • Lack Of Common Measure • Lack Of Sub-divisions • Lack Of Store Of Values • Specialization Not Possible • Deferred Payments • Difficulties Of Transfer Of Wealth • Difficulties In Tax Collection

  4. Monetary System responded to Barter System • Uses of Money • Medium of Exchange • Common measure of value • Unit of Account • Standard of Deferred Payment • Store of Value • Liquidity of Wealth • Establishment of Financial Institutions • Market Mechanism • Circular Flow of Money • Process of Development.

  5. Evolution of Money • Commodity Money • Metallic Money • Paper Money • Credit Money • Electronic Money • Near Money

  6. Supply of Money The supply of money is the total amount of money in the economy. There are three alternative views: • Traditional View (keynesian) • M1 = Currency in circulation + Near Money • Broader View (Friedman) • M2 = M1 + Time Deposits • Broadest View (Gurley and Shaw) • M3 = M2 + NDFC Certificates + National saving Certificates

  7. Existing Forms of Money ?

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