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Money. Banking and monetary policy. Money: role forms and functions

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Money is necessary in most economies. Most people use money every day. But they rarely think about why money is important and what gives it value. In general, money is any item that is widely accepted as payment for products.

Money comes in several forms. The familiar paper bills and metal coins are only two of the forms money can take. In this form they are called currency. In the past, many things served as money - beads, shells, dog's teeth, cattle, stones and other. Most of the items used as money, however, have had value only because people agreed that they could be exchanged.

Nowadays most money is in the form of checking accounts. A checking account is a bank account in which money has been invested and a withdrawal can be made at any time using a check.

Time deposits are considered a form of money. A time deposit is a bank deposit that can be withdrawn at a certain time in the future, or on advance notice. Time deposits cannot be withdrawn using a check.

A check is a written order to a bank to pay a certain amount of money to the person or business. Checks provide a legal record of financial transactions, but checks are not legal tender.

Legal tender is money that, by law, must be accepted in payment of debt. Also there several other things are used like money. Credit cards are a common way to purchase goods and services; it can be exchanged for anything.

Economists call things used for some of the functions of money near money (Credit cards, Insurance policies).

In most modern economies money serves several functions. As a means of exchange money is used to trade for goods and services. The more complex a country's-economy, the harder it is to use a system of trading one good for another.

As a store of value people use money to save their wealth for the future. Storing goods is not so easy as storing money. But money can be kept in a bank or a safe or a pocketbook until it is needed.

As a standard of value money is used to compare the worth of one product with that of another. The value of all goods and services the economy produces can be determined by adding up their prices. In this way, economists determine GNP.



Money is very important in our society. As a store and a standard of value and as a means of exchange, money helps the economy run smoothly.

The supply of money.

Your personal supply of money changes often. Increases and decreases of your supply of money probably affect how much you spend. Similarly, the amount of money in the total economy changes often.

Changes in the economy’s money supply are complex. The fluctuations of the money supply influence the general level of business activity.

The money supply is constantly changing. The government prints new bills and mints new coins every year to replace those that are worn. It change the money supply to meet people’s needs. The supply o checking account money also changes. Banking laws in different countries require a bank to put a certain percentage of its deposits in reserve.


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