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The word Money is derived from Roman word “Moneta Juno”

1. iv 

2. v 

3. ii 

4. iii 

5. i

Effects of Black Money on economy 

1. Dual economy 

2. Tax evasion, thereby loss of revenue to government. 

3. Undermining equity 

4. Widening gap between the rich and poor 

5. Lavish consumption spending 

6. Distortion of production pattern 

7. Distribution of scarce resource

8. Effects on production.

1. Dual economy 

2. Tax evasion, thereby loss of revenue to government. 

3. Undermining equity 

4. Widening gap between the rich and poor

Investment can be made in different investment vehicles like, 

1. Stock 

2. Bonds 

3. Mutual funds 

4. Commodity futures 

5. Insurance

6. Annuities 

7. Deposit account or any other securities or assets

The value of money is of two types 

1. Internal value of money 

2. External value of money 

The Internal value of money refers to the purchasing power of money over domestic goods and services. The External value of money refers to the purchasing power of money over foreign goods and services.

1. Inflation refers to the prices are rising, the value of money will fall.

2. Deflation refers to the prices are falling, the value of money will rise.

1. Savings represents that part of the person’s income which is not used for consumption

2. Investment refers to the process of investing funds in capital asset, with a view to generate returns

Robertson is defined as, “Money is anything which is widely accepted in payment for goods or in discharge of other business obligations”.

The British gold coins were termed as Carolina, the silver coins as Angelina, the copper coins as cupperoon and the tin coins as tinny.

Commodity Money, Metallic Money, Paper Money, Credit Money, Near Money and recent forms of Money.

No. we disagree. Anything cannot function as money. For a thing to be used as money it must possess the following qualities:

i. General acceptability: Good money is the one which is readily accepted by all without any reluctance. This quality is possessed by gold and silver.

ii. Divisibility: Any commodity acts as good money if it can be divided into small units. For example, currency notes, gold, silver and coins possess the quality of divisibility as they can be divided into different denominations.

iii. Durability: It should possess the quality of durability. That is, it should be long lasting. As currency coins are made up of metal, these are more durable compared to currency notes.

iv. Cognizibility: By cognizibility, we mean that good money is the one which is easily recognisable by all the members of the society and so special efforts are not required to recognise it.

v. Portability: It should be easy to carry from one place to other without any difficulty, expenses or inconvenience.

vi. Homogeneity: Money of the same denomination should be homogenous in size and quality. For example, all Rs. 5 coins should be of the same size, colour etc.

vii. Stability of value: Anything which is used as money should be stable. In the sense, value of money should not change frequently.

The above statement is true. Money facilitates the estimation of national income as the value of all the goods and services produced in a country and all the factor payments made to factor inputs can be expressed in terms of money, which is summedup to calculate national income.

The above statement is false. The currency notes and coins issued by the Reserve Bank of India (RBI) and the Government of India (GOI) are collectively called ‘Fiat Money’. Since cheques are not issued by the RBI and GOI, they are not fiat money.

Economists have interpreted value of money in different ways, but the most prevalent meaning of value of money is implied in its purchasing power. This means that the quantity of goods and services that could be purchased in exchange of one unit of money, is its value.

For Example – 1 kg wheat costs Rs. 20. It also means that 1 kg of wheat can be purchased for Rs. 20, therefore the purchasing power of 1 kg of wheat is equal to the sum total of Rs.20.

In present time, money has an important place in every sphere of economic activity. The operations of economy cannot be imagined today without money. Marshall has rightly said, “Money is that pivot around which the science of economics revolves.” Prof Harris, clarifying the importance of money, says, “All human and divine things, fame and prestige bow down before money.”

It is evident from the above discussion, that in present time, money is of utmost importance.

The contingent functions of money are as follows :
(i) Distribution of Social Income – Money facilitates the just distribution of social income. Production activities are done by the collective efforts of various means of production, hence it is necessary to distribute the income obtained from produced commodity in a just and equitable manner. This has been made possible by money.

(ii) Basis of credit – It is money which has created the credit system. Money has made it possible for banks to extend loans.

(iii) Liquidity of wealth – Money provides liquidity to capital or wealth. Today, any person can sell his house in one city, collect the money and easily purchase another house in another city.

M₁ = C + DD + OD
C = Accumulation of notes and coins with people
DD = Demand deposit (with banks)
OD = Other deposits with Reserve Bank.

The cost of an egg – Rs 4

The cost of a dozen egg – Rs 12 × 4

The amount of a dozen eggs – Rs 48

Girija buys 2 Kg of beans – Rs 36.50

Girijabuys 1 Kg of tomatoes – Rs 12.25

Girija buys 1 Kg of potatoes – Rs 14.75 6

The total Amount Girija pay to the shopkeeper – Rs 63.50

(d) M₁ + Saving deposits with post office

Two primary functions of money are :

1. Medium of exchange
2. Measure of value.

(a) Medium of exchange

(d) Price stability

(d) All of these

Barter or exchange system is such a system of the economy in which goods are exchanged for other goods.

(c) Barter exchange system

Correct Option is :

(D) 1 – e; 2 – d; 3 – c; 4 – b; 5 – a

Money, as a medium of exchange, means that it can be used to make payments for all transactions of goods and services. It is the most essential function of money. Money has the quality of general acceptability. So, all exchanges take place in terms of money. This function has removed the major difficulty of lack of double coincidence of wants and inconveniences associated with the barter system. Use of money allows purchase and sale to be conducted independently of one another. This function of money facilitates trade and helps in conducting transactions in an economy. Money has no power to satisfy human wants, but it commands power to purchase those things, which have utility to satisfy human wants.

Functions of money:

(i) Medium of exchange.

(ii) Store of value

(iii) Unit of account

(iv) Standard of deferred payments

The functions of money can be classified into the following two categories:

(i) Primary Functions: These are those functions which are common to all countries during all time periods. These include the following:

(a) Medium of exchange: It means that money acts as an intermediary for the exchange of goods and services.

(b) Measure of Value: Money serves as a measure of value in terms of unit of account. i.e., in monetary units. For example, value of sugar can be expressed in monetary unit by saying that price of sugar is Rs.15 per kg.

(ii) Secondary Functions: These are those functions which are supplementary to the primary functions discussed above. These include the following:

(a) Standard of Deferred Payments: Deferred payments refer to those payments which are made in future. Money is accepted as a standard of deferred Payments because, (a) its price remains stable, (b) it has general acceptability (c) it is more durable compared to other commodities.

(b) Store of Value: It is convenient to store value in terms of money because. (a) it has general acceptability, (b) stability of its value, (c) it is convenient to store money.

(c) Transfer of Value: Money serves as a convenient mode of the transfer of value, because of its general acceptability and the merit of liquidity.

Contingent function of money

(i) We find that individuals don't spend their entire income. They may save a part of their income to store it for use at later date.

(ii) They do this as they know that money will be acceptable at any time in future for buying any commodity which they desire.

(iii) In the barter system, it is difficult to store commodities as it involves costly storage/reduction in quality or value of the stored commodity. Thus, money overcomes the problem of storage that exist in barter system.

(i) With the introduction of money, the value of each commodity can be estimated from its price which is in terms of a common unit, say rupees.

(ii) For e.g., we know that the value of one pen is Rs.10 and value of a notebook is Rs.20.

Therefore, 2 pens are equivalent to 1 notebook. Therefore, the relative value of goods can be determined.

(iii) In barter system, if there are 10 goods the price of each good is measured in terms of 9 other goods which makes the exchange more complex. Thus, there is no common measure of value which gets overcome with the introduction of money.

(i) Medium of Exchange

(ii) Units of account

(iii) Store of value

(iv) Standard of deferred payments.

Detailed Answer:

The functions of money can be classified into the following two categories:

(i) Primary Functions: These are those functions which are common to all countries during all time periods. These include the following:

(a) Medium of exchange: It means that money acts as an intermediary for the exchange of goods and services.

(b) Measure of Value: Money serves as a measure of value in terms of unit of account. i.e., in monetary units. For example, value of sugar can be expressed in monetary unit by saying that price of sugar is Rs.15 per kg.

(ii) Secondary Functions: These are those functions which are supplementary to the primary functions discussed above. These include the following:

(a) Standard of Deferred Payments: Deferred payments refer to those payments which are made in future. Money is accepted as a standard of deferred Payments because, (a) its price remains stable, (b) it has general acceptability (c) it is more durable compared to other commodities.

(b) Store of Value: It is convenient to store value in terms of money because. (a) it has general acceptability, (b) stability of its value, (c) it is convenient to store money.

(c) Transfer of Value: Money serves as a convenient mode of the transfer of value, because of its general acceptability and the merit of liquidity.

Unit of Account function of money means that money can be used for quoting prices or recording transactions. This removes the difficulty of keeping accounts and makes possible the existence of financial institutions.

Detailed Answer:

(i) With the introduction of money, the value of each commodity can be estimated from its price which is in terms of a common unit, say rupees.

(ii) For e.g., we know that the value of one pen is Rs.10 and value of a notebook is Rs.20.

Therefore, 2 pens are equivalent to 1 notebook. Therefore, the relative value of goods can be determined.

(iii) In barter system, if there are 10 goods the price of each good is measured in terms of 9 other goods which makes the exchange more complex. Thus, there is no common measure of value which gets overcome with the introduction of money.

Deferred payments are postponed, payment to be made in future. Such payments, arise on account of borrowing, and lending activities. It has removed the problem of absence of financial institutions in the Barter System. It has also removed the problem of trading in wider areas.

Detailed Answer:

Money as a standard of deferred payments means that money acts as a 'standard' for payments, which are to be made in future. Every day, millions of transactions take place in which payments are not made immediately. Money encourages such transactions and helps in capital formation and economic development of the economy. Money as a standard of deferred payments has simplified the borrowing and lending operations. It has led to the creation of financial institutions. Under barter system, it was very difficult to make future payments and contractual payments such as salaries, loans, interest payments, etc. For example, it was difficult to decide whether wages to a labour are to be paid in terms of food grains or any other commodity. This is because it was difficult to value the services of labour in terms of a commodity. Similarly, if a loan is taken in the form of a commodity, then the problem will arise in its repayment. However, as superior to the Barter System, money made the system of deferred or contractual payments such as salaries, interest payments, etc. possible.

Value of money is the purchasing power of money over goods and services in a country

1. Online Banking, also known as internet banking is an electronic payment system.

2. It enables customers of a bank or other financial institutions to conduct a range of financial transactions through website.

Money is used as the source to fulfill basics needs as well as comforts in life. It gets people accommodation, clothes, food and other things which add to luxury in life. It is an important source to live a healthy life too.

1. E – Money:

Electronic Money is money which exists in banking computer systems and is available for transactions through electronic system.

2. E – Banking:

Electronic banking, also known as National Electronic Funds Transfer (NEFT), is simply the use of electronic means to transfer funds directly from one account to another rather than by cheque or cash.

Functions of money are classified into Primary or Main function, Secondary function and Contingent function.

Primary or main functions: 

The important functions of money performed in very economy are classified under main functions:

1. Medium of exchange or means of payment – Money is used to buy the goods and services.

2. Measure of value – All the values are expressed in terms of money it is easier to determine the rate of exchange between various type of goods and services.

Secondary functions:

The three important of secondary functions are

1. Standard of deferred payment – Money helps the future payments too. A borrower borrowing today places himself under an obligation to pay a specified sum of money on some specified future date.

2. Store of value or store of purchasing power – Savings were discouraged under barter system as some commodities are perishable. The introduction of money has helped to save it for future as it is not perishable.

3. Transfer of value or transfer of purchasing power – Money makes the exchange of goods to distant places as well as abroad possible. It was therefore felt necessary to transfer purchasing power from one place to another.

Contingent functions:

• Basis of credit
• Increase productivity of capital
• Measurement and Distribution of National Income

(c) No effects on production

Money has evolved through different stages according to the time, place and circumstances. 

1. Commodity Money: In the earliest period of human civilization, any commodity that was generally demanded and chosen by common consent was used as money.

Example Goods like furs, skins, salt, rice, wheat,utensils, weapons etc. Such exchange of goods for goods was known as ‘Barter Exchange’. 

2. Metallic Money: With progress of human civilization, commodity money changed into metallic money. Metals like gold, silver, copper, etc. were used as they could be easily handled. It was the main form of money throughout the major portion of recorded history.

3. Paper Money:

(a) It was found inconvenient as well as dangerous to carry gold and silver coins from place to place. So, invention of paper money marked a very important stage in the development of money.

(b) Paper money is regulated and controlled by Central bank of the country (Reserve Bank of India). At present, a very large part of money consists mainly of currency notes or paper money issued by the central bank.

4. Credit Money or Bank Money:

(a) Emergence of credit money took place almost side by side with that of paper money.

Example Cheque.

(b) The cheque (known as credit money or bank money), itself, is not money, but it performs the same as functions of money.

5. Near Money: The final stage in the evolution of money has been the use of bills of exchange, treasury bills, bonds, debentures, savings certificate etc.