Advertisements
Advertisements
प्रश्न
Answer the following question.
Define money. Lists its components.
उत्तर
Money is the usually accepted medium of exchange through which the value of goods and services is measured in a common unit. The stock of money has the following two major components.
Currency Component
The currency notes and coins as issued by the Monetary Authority are collectively called the Currency Component of the money supply. In India, RBI issues the currency notes of various denominations (such as Rs 2, Rs 5, Rs 10, Rs 50, Rs 100, Rs 500, Rs 1000). On the other hand, the Government of India issues currency coins and notes of a denomination less than and equal to Re 1. These currency notes and coins issued by the RBI and GOI are collectively called the Fiat Money or the Legal Tender Money.
Fiat Money implies that the currency notes and coins do not have any intrinsic value. In other words, the real value of the paper (in case of currency notes) and metals (in case of coins) is not equivalent to the face value printed on the notes and coins. Fiat money derives its value only because of government order (fiat).
The currency issued by the Monetary Authority is also known as Legal Tender Money. It implies that the values of such currency notes and coins are backed by the Monetary Authority. The Monetary Authority provides a person with purchasing power equal to the face value of the currency held by him. The fiat money becomes the legal tender when it is backed by the Monetary Authority. Moreover, the currency notes and coins issued by the Monetary Authority cannot be refused by any citizen of that country for the settlement of transactions. Therefore, it becomes the legally medium of payment in the economy.
Deposit Component
Apart from the currency notes and coins, the stock of money also includes the Saving Deposits and the Current Account Deposits held by the public in various commercial banks.
Deposits held by the public can be classified into two major categories- Term Deposits and Demand Deposits.
- Term Deposits- These are also known as Time Deposits. These refer to the money deposits that are held for a specific (fixed) time period say, 5 years, 10 years. Such deposits cannot be withdrawn before the maturity of the specified time period for which they are held. Also, these are non-chequeable deposits i.e. no cheques can be issued against the Term Deposits.
- Demand Deposits- As opposed to the Term Deposits, the Demand Deposits are the deposits that are payable on-demand or on call. In other words, such deposits can be withdrawn by the depositor as and when required. Since demand deposits are always available on-demand, they are chequeable deposits i.e. cheques can be issued against such deposits.
APPEARS IN
संबंधित प्रश्न
Money performs various functions.
Method of withdrawing money without going to the bank is by ...................................
(cheque \ demand draft \ ATM \ mail transfer)
A bank is an institution which deals in money and credit.
Write Short Note.
Qualities of good money
Distinguish between
Full bodied money and token coins
Define or explain following concept:
Money
Define or explain following concept:
Near money
Define or explain following concept:
Limited legal tender
State whether the following statement is true or false.
Token coins are coins whose face value is greater than their intrinsic value.
State whether the following statement is true or false.
Money increases productivity of capital.
Match the following:
| Group A | Group B |
| 1. Near Money | a. Sea Shells |
| 2. Secondary function of money | b. Double coincidence of wants |
| 3. Commodity Money | c. Fiat money |
| 4. Barter | d. Measure of value |
| 5. Legal tender | e. Bills of exchange |
| f. Standard of deferred payments | |
| g. Metallic money |
Fill in the blank with appropriate alternatives given below
In the case of __________ coins, intrinsic value is less than their face value.
Fill in the blank with appropriate alternatives given below
Introduction of __________ removed difficulties of barter.
The broad definition of money is based on ______
With reference to money, which one of the following statements is correct?
Read the passage given below and answer the questions that follow.
| A change in the rupee-dollar exchange rate represents a change in the external value of the rupee. The value of the rupee, in terms of the dollar, has been falling continuously over a period of time. Since the rupee-dollar exchange rate is determined by the demand for and supply of dollars, it is possible that the value of the rupee will slide further if appropriate measures are not taken. The Reserve Bank of India, in charge of both the internal and external value of the rupee, has repeatedly emphasised maintaining stability in the foreign exchange market. |
- What kind of exchange rate system is being referred to in the passage?
- The value of the rupee, in terms of the dollar, has been falling continuously over a period of time.” Give the economic term for this phenomenon.
- How would this phenomenon affect balance of payments?
- Explain the role of the Reserve Bank of India as custodian of foreign exchange.
- Suggest any two measures to correct adverse balance payments.
