CLASS 12 Economics - Introductory Macroeconomics Money and Banking

NCERT, India (2020) CLASS 12 Economics - Introductory Macroeconomics Money and Banking. [Teaching/Learning Resource]

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Abstract

Money is the commonly accepted medium of exchange. In an economy that consists of only one individual, there cannot be any exchange of commodities and hence there is no role for money. Even if there is more than one individual but these individuals do not take part in market transactions, for example, family living on an isolated island, money has no function for them. However, as soonas there is more than one economic agent who engages themselves in transactions through the market, money becomes an importantinstrument for facilitating these exchanges. Economic exchanges without the mediation of money are referred to as barterexchanges. However, they presume the rather improbable double coincidence of wants. Consider, for example, an individual who has a surplus of rice that she wishes to exchange for clothing. If she is not lucky enough she may not be able to find another person who has the diametrically opposite demand for rice with a surplus of clothing to offer in exchange. The search costs may become prohibitive as the number of individuals increases. Thus, to smoothen the transaction, an intermediate good is necessary which is acceptable to both parties. Such good is called money. The individuals can then sell their produces for money and use this money to purchase the commodities they need. Through the facilitation of exchanges is considered to be the principal role of money, it serves other purposes as well. Following are the main functions of money in a modern economy

Item Type: Teaching/Learning Resource
Program: Introductory Macroeconomics Money and Banking
Learning outcomes: The commercial banks of the country and RBI are responsible for changes in the supply of money in the economy
Access: Open
Uncontrolled Keywords: Open Educational Resources (OER), Money and Banking Macroeconomics
Subjects: Economics
Curriculam Level: 5. Senior Secondary
Depositing User: COL Staff
Date Deposited: 25 Feb 2021 11:59
Last Modified: 20 Apr 2021 16:18
URI: https://nru.oer4pacific.org/id/eprint/172

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