Question

Forum: Chapter 14: Money, Banking and Financial Institutions

Write a discussion board around 150 words

Answer 1

Answer:-

Money:-

Evolution of money:- Due to the limitation of barter system , the exchange process highly inefficient, it was to overcome these difficulties that money, was invented by the society due to increasing scale of industrialisation and commercilaton.

Meaning of money:- Money is anything which is commonly accepted as a medium of excahnge, a unit of value, a store of value, and means for standard of deferred payments.

Function of money:- Money perform four specific function, each of which overcome one of the problems of barter. The function of money is devided into to parts 1. Primary Function and 2. Secondry function.

1. Primary function:

a.) A medium of exchange:- This is the most basic function of money, in the present time all exchange take place in the term of money.

b.) Money is the unit of value:- Money is a unit of account or it has a unit of value. the value of each goods and services is expressed in it's price.

2. Secondry function:-

a.) A standard of deferred of payments:- Money makes possible the credit transaction to happens when payment are not made immidiately.money is standard deffered payment faciliatated market transaction of buying, selling , borrowing etc.

b.) Store of value:- Money occupies less space in comparison with the goods. It is an assets and can be stored in future.

Banking:- Banking means the accepting of deposits of money from the public, repayable on demand or otherwise, and withdrawal by ATM, Cheque, Drafts etc.In the most of the countries bank are regulated by the national government or central bank.

There are two types of banking which we have to study:1. Commercial banking and 2. Central banking.

1:- Commercial banking:-A commercial banking is a financial institution which perform the accepting the deposits from the public and advancing the loan to the public with the main motive of gain profit.

Function of commercial bank:-

a.)Accepting Deposits:- A commercial banking accept the deposits from the public.

b.)Advancing loans:- A certain part pf the cash recived by bank as deposits is kept in the reserve and the rest is given to as loan.

c.)Credit creation:- The credit or deposit created by the commercial bank called derovetive deposits.

2. Central banking:- A central banking is an apex institution that controls and regulates the monetary an financial system of the country. In U.S. the central bank is the Federal Reserve System aka The Fed .The federal Reserve Bord, the governing body of the fed can affect the national money supply by changing reserve requirements.

Functions of Central bank:-

a.)Bank of issue:- Bank of issue refers to the bank which has legal right to issue the currency.It is the monetry liability of central bank to issue new currency.

b.)Banker to the government:- It perform the carrying out all banking business of the government , Granting loan and advance to the government, and managing the debt means manage all new issue of government loans.

Financial institution:- A financial institutions is an establishment that conducts financial transaction.like as the granting the loan, excahnging the currencies ,accepting the deposits etc. Afinancial institution is manage the supply of money to the market through the transfer of funds from the investors to the companies in the form of deposits, investments.

Thank you plz rate positive?