MONEY
Money is anything that is generally acceptable as a means of exchange and at the same time, act as a measure and as a store of value.
Barter System :- Barter system means the direct exchange of one commodity to another.
Barter Economy can be termed as C-C economy i.e., Commodity for Commodity economy.
double coincidence of wants –This occurs when two people have goods they are both happy to swap in exchange. i.e. a perfect barter exchange.
Liquidity Trap - It is a situation of very low rate of Interest in the economy where every economic agent expects the interest rate to rise in future and consequently bond price falls, causing capital loss.
TYPES OF MONEY
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- Fiat money refers to money backed by order or authority of the government.
Example: Notes and coins.
- Fiduciary money refers to money backed up by trust between the payer and payee.
Example: Cheques are fiduciary money as these are accepted as a means of payment on the basis of trust but not on the basis of any order of the government
- Commodity money is the simplest and, most likely, the oldest type of money.
- Commercial bank money can be described as claims against financial institutions that can be used to purchase goods or services.
- commercial bank money is debt generated by commercial banks that can be exchanged for “real” money or to buy goods and services.
Transaction demand for money is positively associated with the level of income, as higher the level of Income, larger would be the size of money holdings for transactions.
