Money and Banking

1. Forms

2. Functions

3. Functions : • Money is a medium of exchange • Money is unit of account • Money is a store of value • Money is a mean of deferred payment

4. Different forms of money: Gold Paper money Coins Copper Precious stones Silver

5. Central

6. Characteristics of Money

6.1. Portability: It must be easy to carry

6.2. Uniformly: To be a measure of value all bills with the same value need to be exactly the same.

6.3. Durability: It needs to last for a long period of time in order to maintain it’s Value.

6.4. Acceptability: It must be valued and widely recognised as a legal means of payment for goods and services

6.5. Divisibility: To be valued as a medium of exchange it must be easily divisible. $100 bills can easily be exchanged with $20 or $50

6.6. Uniformly: To be a measure of value all bills with the same value need to be exactly the same

6.7. Scarcity: An oversupply of money would make it worthless. There needs to be a limited supply in order to maintain value

7. Characteristics

8. Commercial

9. Banking

9.1. Banks • Banks are the main types of financial institution in the market for money • A bank is a financial intermediary because it brings together customers who want to save money and customers who want to borrow money.

10. Roles : • Managing the creation and distribution of currency • Regulating commercial banks to ensure that the poducts they provide contribute to a healthy economy • Setting the interest rate in an economy • Facilitates all payments between banks • Lender of last resort to commercial banks • Managing the exchange rate of a nation's currency • Monitor corrupt money flows with other central banks in the global financial system.

11. Roles : • Accepting deposits • Current accounts • Making loans • Creating credit

12. Importance

13. Why do we need money : To support specialization and exchange. For example a man selling clothes would need food to survive but the street vendor would not want to trade their food for clothes because they have enough. Money is a form of exchange that can help this. If the man manages to sell his clothes for $5 he will be able to trade that money for food and then the street vendor will have something to trade to with that he wants or needs.