2 Money

INTRODUCTION

The concept of money is an important concept which has brought ahout a revolutionary the
change in the economic life of human beings. Modern economy is dependent on money. To reduce
diffculties in Barter Systemn, concept of money has introduced.
In this chapter, you will learn about the diffieulties in Barter System, Money, Types of
money, Qualities of Money, and Functions of Money.

GIST OF THE CHAPTER

goods
(1) Barter System: Barter system refers to the system where goods are exchanged for other
without use of money.
(2) Difficulties in Barter System:
Problem of double coincidence of wants,
Lack of common measure of value,

Difficulties in storage of goods,

" Problem of indivisibility of certain goods,
" Problem of making deferred payments.
of time,
(3) Money: Money has come into existence by evolution and not by revolution. With passage
of time and
the commodities which were used as money have changed depending upon the need
development of civilization.
(4) Definitions of Money:
" According to Prof Crowther, "Money is anything that is generally aeeeptable as a means
of exchange and at the same time acts as a measure and a store of value"
" According to Prof Walker, "Money is what money does":
(5) Types of Money:
" Animal Money . Commodity Money
" Metallic Money . Metallic Coins
" Paper Money Bank or Credit Money
" Plastic Money Electronic Money
(6) Functions of Money: It is classified into three:
Secondary Functions Contingent Functions
Primary Functions
Medium of Exchange Standard Deferred Measurement of National
" Measure of Value or Unit Payments Income
of Account Store of Value Basis of Credit
Transfer of Value Imparts liquidity to Wealth
Estimation Maero
economic variables

(7) Concept of Black Money: Black Money is any money which is received in cash but not
accounted for and on which tax is not paid to the government. In its simplest form, black money
0S money on which tax is not paid to the government.
(19)
0

MY WORD DESK:
Durability
Reliable Ser
ised for long
time peri
|Cognizability T'o be recognised
Words Meaning Portability Easy to carry
Intellectual Process of thinking and
Homogeneous Same group
understanding
Fundamental Basic Stability Fixed
Mechanical Use of machines Medium Means to do
Revolutionary Complete change Value Use
|Circulation Distribution Commercial Business
Barter system Exchange of goods for Liquid asset
goods
Asset which can
Coincidence By chance Budget
converted into mones
Perishable |Gets spoil easily Estimated income an
expenses set over per
Bulky of time
Large Illegal Not as per law
Inconvenient Difficult not possible to do Black marketing Trade
activities using lezs
Indivisible Cannot be separated
Deferred In future Hoarding Holding the resouroes
Civilization Human, social and
Bribery Influencing other
cultural development offering money
Evolutionary Development Obstacles Problems
Protohistoric period period between Instability Not fixed
Metallic prehistory and history Demonetization Change in current forms
Use of metal
Precious of monev
Of great price
Uniformity
Affixed Similarity
Attach
" GDP ABBREVLATIGrossONS
-
Authorities " GNP
-Gross
Domestie Produet
Power " National Product
Face value E-money - Electronic
Intrinsic value
Exchange value
money
Money
-Face Value
Value of the money Intrinsic Value
Substitute
Monopolized Option OBJECTIVE TYPE QUESTIONS
Denomninations Controlled
Face value
1.A Choose(1 the correct
of
money mark each) option
Handling To deal "(1)
Monetary Arrange in the order of evolution
Digital wallets Dealing with money money.
(a) Metalic money
Electronic transaction
electronic device for doing (c) Metalliccoins (b) Aninal money
Option:
(1) a, h, c, d
(d) Commodiry
(3) d e
 Economnics - XI

) Arrange in the order of evolution of *(3) Commodity money : Shells :

money. Credit eard
(a) Plastic money (b) Paper money *(4) Divisibility Smaller denomination : :
(c) Electronic money (d) Credit money Easy to carry from one place to
Option: another.
(1) b, d, a, c (2) a, b, c, d *(5) Barter
(4) c, b, a, d
system : Goods :: Modern economy
(3) d, c, b, a
(3) Difficulties in Barter System: (6) Bills of exchange:Credit money :: Feathers
(a) Problem of double coincidence of wants :
(b) Lack of common measure of value
Ans. (1) Secondary function of money
(c) Diffculties in storage of goods (2) Contingent function of money
(d) Divisibility of goods possible
(3) Plastic money
Options:
(1) b, e, d (2) a, b, c (4) Portability
(3) a, b, c, d (4) a, b, d (5) Money
(4) Qualities of Money: (6) Commodity Money
(a) General Acceptability
(b) Durability *Q.1.[C] Suggest the economic terms for
(c) Non - Divisibility the given statements
(d) Portability (1 mark each)
Options: (1) The act of exchanging goods for goods.
(1) a, c, d (2) a, b, c (2) Provision for making payments in future.
(3) a, b, d (4) b, c, d (3) System that makes use of currency for
(5) Not a commodity money: facilitating payments.
(a) Feathers (b) Tusk
(c) Aluminium (d) Animal Skin (4) Credit instrument through which bank
deposits are transferable.
Options:
(3) c (4) a, c (5) Monetary value stored and transferred
(1) b, a (2) c, d electronically by means of computer hard
(6) Features of non - legal tender money: drive or servers.
(a) No legal compulsion
(6) Money not accounted for in the bank and
(b) Cheques, Bills of Exchange, etc. not disclosed to the government.
(c) Used by people for final payment
(d) It is backed by law Ans. (1) Barter System
Options: (2) Deferred payment
(1) a, c, d (2) a, b, c
(3) Digital system
(4) b, c, d
(3) b, d (4) Cheque /Demand Draft
(2)- (1) b, d, a, c (5) E-money
|Ans. (1) -(2) b, d, a, c
(3) - (2) a, b, c (4) - (3) a, b, d (6) Black money
(5) - (3) c (6) - (2) a, b, c
Q1D) Find the odd word out:
(1 mark each)
Q1.[B) Complete the correlation:
(1 mark each) not given by -
(1) Definition of money(b) Crowther
"(1) Primary function of money: Medium of (a) Walker
1:Transfer of value (d) Seligman
exchange:: (c) Marshal
*(2) : Basis of credit : Secondary of money
(2) Nota good quality (b) Portability
functions of money : Standard of deferred (a) Homogeneity
payments.
 (c) Changing value of money Rel
Q1.[F] Choose the wrong pair
iable Seri
(d) Cognizability
(3) Nota standard of deferred payment (1 mark each)
(a) Paper money (b) Commodity money () Group A' Group B
(c) Bills of Exchange
(d) Demand drafts
(a) Standard coin Face value more th
intrinsic value
(4) Not a metallic money - (b)Bills of Exchange Credit money
(a) Silver (b) Stones
(c) Black Money Illegal money
(c) Aluminium (d) Nickel
(5) Nota types of money - (2) Group A Group B
(a) Copper Money (b) Animal Money
(c) Commodity Money (a)Commodity noneyCow, sheep, horse, ee
(d) Metallic Coins (b) Barter System
Double coincidence of
(6) Not a functions of money wants

(a) Primary (b) Secondary (c) Electronic money Gold coins

(c) Tertiary (d) Contingent
Ans, (1) -(c) Ans.(1) Wrong Pair : Standard coin - Fac
(2) -(c) (3) - (b) value more than intrinsic value
(4) - (b) (5) - (a) (6) - (c) (2) Wrong Pair: Electronic money Gold
coins
Q.1.[E] Complete the following
(1 mark each)
statements:
Q1.G] Identify the right group of pairs
(1) Money is anything that is from the given option
acceptable as a means of exchangegenerally
and at (1 mark each)
the same time
(2) Token coins are those (1)
whose face value Group 'A Group B
(1) Near Money (a) Sea shells
(3) Cow, sheep, horse, etc.
used as a means
exchange are
of
(2)Secondary
function of
(b) Double coinctdence
(4) Money which is backed by law of wants
be refused in and cannot money
transaction are called (3) Commodity
(c)Bills of Exchange
(5) Any two money
qualities of good money are (4) Barter
(6) Money used for
purchases and
System(d)Standard of deferred
payments
globally is, transactions (5) |Legal tender
(e) Paper meney
Ans.(1) acts as a measure and store of value
Options:
(2) is higher than their (1) (1 - e),. (2-b), (3 - a), (4 -
(3) commodity money
intrinsic value (2) (1 - b), (2- a), (3 - ), d), (5-)
(4) legal tender money (3) (1 -c), (2- d). (3 - a). (4(4-c). (5-e)
- b), (5 -e)
(5) cognizability and (4) (1- a), (2- ). (3 - c),
divisibility (4 -e). (5-b)
(6) electronic money
 23
Ecanomics-1/
nationalized bank
Group 'B
(2)
Group A Thus, it is a concept of Bark Maney
() |Token Coin Credit Money
(a) (3) Charu used her debit cardta purchse
(2)Standard Coin (b) Not steady a shirt for her younger brother
Money (c) Medium of Ans. Concept: Plastic Money
(3) Exchange Explanation:
(4)Value of Money (d) Pace value more (a) Plastie Money is in the form of plastic cards,
than intrinsic
ie., debit and credit cards. it is a modern
cards
value day concept whereby the use of these
(5) Blls of (e) Face value equal involves only transfer of fund inta bank
to intrinsic value Bccount and not the cards
Exchange
that
Options: (b) In the given illustration it is shown
(1) (1 - a). (2- b). (3 -c). (4-e),
(5- d) Charu used her debit card to purchase a
(2) (1 - d), (2 - e). (3 - c), (4-b). (5-a) shirt for her younger brother
(3) (1 - c), (2- e). (3- d), (4-a).
(5-b) Thus, it is a concept of Plastic Money
(5- d)
(4) (1- e), (2-c). (3 - b), (4 - a). (4) Malathi purchased a house through
(4-b), (5-e) an agent. The agent aceepted the
Ans. (1) (3)- (1-c), (2- ), (3-a). comnission anount in cash but did not
a)
(2) (2) - (1-d), (2 -e). (3-c). (4-b). (5- issue a receipt to her.
RELIABLE QUESTIONS Ans. Coneept: Black Money
Explanation:
[Link]] Identify and explain the concept
:
from the given illustration (a) In simplest form, black money is money on
(2 marks each) which tax is not paid to the government
his (b) In the given illustration, it is shown that
(1) Vasantsheth provides coal from Malathi purchased a house through an
shop to farmers in exchange for food
agent. The agent acoepted the eommission
Arains. amount in cash but did ot tssue a receipt to
Ans. Concept: Barter System her.
Explanation: Thus, it is a concept of Black Money
(a) Barter system refers to the system where (5) To prevent misuse/ fraudulent use of
goods are exchanged for other goods without the national eurreney, a note ban is
use of money. imposed on its use at certain tines.
(b) In the given illustration it is shown that Concept: Demonetization
Vasantsheth provides coal from his shop to Ans.
farmers in exchange for food grains. Explanation:
Thus, it is a concept of Barter System. (a) Demonetization is the withdrawal of a eoin.
from use as legai
note, or precious metal
(2) Babanrao deposits his money in a tender. It occurs whenever there is a change
nationalized bant.
of national currency.
Ans. Concept: Bank Money shewn that
(b) In the given illustration it is use of the
Explanation: to prevent misuse fraudulent
(a) Bank Money refers to the bank deposits national currency, a note han is inposed an
its use at certain times.
kept by the people that can be withdraw as
and when required. Demonetiation
Thus, it is a concept of
(b) In the given illustration it is shown
that Babs
 Reliable Serie,
24

Q.2.[B (3) Standard Coins and Token Coins

Distinguish Between :
(2 marks each) Standard Coins
(1) Barter Economy and Money Economy.
Ans. Token Coing
(a)Standard coins are Token coins are
those coins whose those coins whoBe
Ans. Barter Economy Money Economy face value is equal face value is
(a) Barter economy Money economy is to its intrinsic than its intrinsic greater
is a money one where money is value. value or metal value
less economy commonly used asa These are made of
where goods are (b) These are made of
medium of exchange.
exchanged for
costly metals like cheap metals like.
goods. gold, silver, etc. nickel, aluminium
etc.
(b)In this economy In this economy
In today's
exchange of goods exchange of goods is (c) Indian Rupee time these
for goods is direct. indirect i.e. through during king's rule are used for making
were made of gold,small payments,
money. silver, etc.
(c) Exchange of Exchange of
transactions are transactions are (4) Legal
few and difficult., many and smooth.
Tender Money and Non-Lega
Tender Money.
(d) Barter economies Almost all economics
are rarely found. Legal Tender
in the world are
money economies.
Ans.
Money
Non-Legal Tender
(a
Money
(2) Metallic Money and
Paper Money. Legal Tender Non-legal tender
Money is the money is the money
Ans. Metallic Money Paper Money money which is which is generally
(a) It refers to money It refers to that backed by law and used by people but
which is made of money which is refusal to accept there is no legal
metals like gold, in form of paper will be punishable compulsion to
silver and copper, by law. accept.
currency notes
etc.
issued by the Govt. (b) It is issued by the It is issued by
and Central Bank of Central bank of theCommercial banks.
the country. country.
(b) It is more durable. It is less durable. (c)It is freely accepted | It is not a
(c)Metallic money as a medium of legal
is not easily
Paper money is more tender money. No
portable. convenient and they exchange. one can force to
are light in weight, accept it.
so it is portable. (d) Currency notes
(d) It is suitable It is suitable for issued by RBI in Negotiable
instruments such
for small
transactions.
larger transactions. denominations
5, 10, 20, 50, as cheques, bank
100, drafts, bills of
200, 500, 2000
exchange are non
are legal tender |legal tender money
money.
Economics- XI 25

ouestions: (e) Portability:

e3. Answer the following It shotld be easy to carry from one
(4 marks each) place to another without any difficulty,
(1) Write the Qualities of Money. expense and nconvenience.
"Money is For instance, eurreney notes are very
Ans. According to Prof Crowther, a light and easily portable.
anything that is generally acceptabie as
time
same () Homogeneity:
means of exchange and at the
value". Money of a particular denomination
acts as a measure and a store of must be homogeneous or identical in its
follows:
The qualities of money are as features.
For instance, it should be identical
General
Acceptability in size, shape, colour, design, weight.
quality, ete.
Stability Divisibility (g) Stability:
Qualities of Money should have a stable monetary
Money value. In other words, the purchasing
power of money should be stable.
Homogeneity Durability
This is because, it serves as a measure
of value to exchange goods and services.
Portability Cognizibility These goods can be sold and purehased
in future as per requirements.
(a) General Acceptability: (2) What is Barter System? State the
The thing acting as money must be difficulties in Barter System.
generally acceptable as a medium of Ans. Meaning of Barter System:
exchange. (a) A barter system is an old method of
There should not be any hesitation in its exchange. This system has been used
acceptance. for centuries and long before money was
(b) Divisibility: invented. People exchanged goods and
Money should be easily divisible into services for other goods in return.
smaller denominations to facilitate small (b) Barter system refers to the system where
transactions. goods are exchanged fer other goods without
For instance, 5 rupees, 10 rupees, 20 use of money.
(c) With an increase in the number of goods
rupees, etc.
(c) Durability: and services produced, such system faced
- Money should also possess the certain difficulties.
characteristic of durability. It means Difficulties in Barter Svstem are shown
as below:
that it should last fora longer period.
Currency notes and coins are being Problem of double coincidence of
used repeatedly and shall continue to
wants
be used for years together on account of
durability.
Lack of common measure of value
(d) Cognizibility:
- Money must be easily recognizable
(identifiable) and distinguishable from Difficulties in storage of goods
other things. It should have certain
distinct marks so as to avoid confusion.
Problem of indivisibility of certain
Forinstance, coins and notes ofdifferent
denominations must be of different size, goods
shape, design, weight, colour, etc., so
that, it can be easily identified. Problem ofmaking deferredpayments
6

(a) Problem of double coincidence ol loan was diffhcult Reliable Ser

due t0
wants:
Under barter system, exchange 1S
commodities.
exchatig
For instance,,ttaking a loan n
possible only when there is double a payment in future is not and malk
coincidence of wants.
For instance, MrA has wheat and want
tbarter systetn.
Thus, these difficulties led to
possihle
salt. So, Mr A has to search for Mr B who of money.
the inveot
wants wheat and has salt, otherwise the
(3) Explain the concept of Black mone
exchange would not be possible. Ans. (a) Black money ts any money wi
Thus, lack of double co-incidence of received in cash but not accounted fo
wants was one of the major limitations on which tax is not paid to the govern
of barter system. (b) In its
(b) Lack of common measure of
value:
simplest forn, biack money
on which tax is not paid to the
is o
In barter system, there was no standard goveram
unit of account to determine the value of
(c) Black money encourages llegal actis
a commodity. such ascorruption, bribery, black murke
Due to which, it was difficult to measure hoarding etc.
(d) Black monev is tax evaded incomet
or calculate the value of goods exchanged. can be earned through both legal and illen
For instance, it was difficult to compare
means. This creates obstacles in econo
two litres of milk with two kilograms of
rice. development.
(e) To control black money,
(c) Dificulties in storage of goods: demonetizatiog
one of the tools, which many
In barter system, it was necessary to adopted.
countries
hav
store goods for future consumption.
Sometimes due to perishable nature For your understanding:
of certain goods it was difficult to store * Tax evaded income is a
non- payment of
them for future. taxes by means of not reporting all taxable
For instance, perishable commodities income especially through fraud or eoneealment
like milk, eggs, fish, vegetable, etc. were of income.
difficult to store.
Also, diffculty was 4. State
lack of space requiredexperienced
due to with reasons
to store heavy and agree or disagree with the whether you
bulky goods. following
(d) Problem of
statements:
goods:
indivisibility of certain (4 marks each)

Under barter system, making a fractional (1) There are no dificulties in barte
payment was dificult especially when Ans. System.
certain commodities which was to be No, I do not agree with
the statement.
exchanged was indivisible in nature. Reasons:
For instance, person "A' has a sack of There are difficulties in barter
rice and he wants a goat in They are as follows: systetm
But person "B has a goat and exchange.
he wants [Note : For Ansuer Refer. Q.3. (2) Poimts
only halfa sack of rice. to (d))
In this situation exchange
between the *{2) There are many good gualities found i
two
commodities impossible due to
is
indivisible nature of goat, for it beinga Ans. modern currency.
Yes, I do agree with the
live stock.
Reasons: statement.
(e) Problem of making
deferred payments: There are many good qualities found
Deferred payments means payments modern
to be made in future. (a) General currency. They are as follo*
Repayment of Acceptability:
has a tendency
Moder cutru
of general acceptability
 27

anywhere through
Eeonomnics- XI (4) Money can be sent
medium of exchange electronie means.
is acepted by all as a statement.
without any hesitation.
easily Ans. Yes, I do agree with the
are
Divisible: Modern currency
denominations which Reasons:
b) snaller of new technologies,
facilitatesinto
divisible smaller transactions. (a) With an inventionanywhere- Nationally or
20 money can be sent
rupees, 10 rupees, money.
For instance, 5 Globally with the help of electronicE-money.
known as
rupees, ete.
possess the (b) Electronic money is also
MModern currency
that monetary value that is stored and
ic) Durable: of durabil1ty. It means It is a through a variety
characteristic Currency transferred electronically
last for a longer period. and phone, tablet, smart
it can
coins can be used
repeatedly of means i.e. a nobile
notes and together on cards, cornputer, etc.
continue to do so for years purchases
will
account of durability. Electronic money is used for by
(c) transactions. It is backed
are very
Modern currencyportable and global
Portability: i.e. Digital walleta are also a
(d)
in weight and
areeeasily
another the Central Bank. money.
light
from one place to form of stored electronic
it can be carried due to above reasons, money can be
place easily. (d) Thus,
Modern currency are electronic means.
(e) Homogeneity: identical in size, shape, sent anywhere through
havethe quality of
homogeneous or
weight, quality, etc. (5) Money should
colour, design, Cognizibility.
accomplished by money. the statement.
3) Many tasks are statement. Ans. Yes, I do agree with
agree with the
Ans. Yes, I do Reasons:
easily
recognizable
Reasons: must be
number of task in (a) Money
(identifiable) and distinguishable
from other
Money performns They are as follows:
toda_'s economy. as a
Medium of Exchange: Money actsbuying things.
have certain distinct marks
s0 as
(a) which makes (b) It should
medium of exchange and services possible to avoid confusion.
different
and selling of goods exchange instance, coins and notes of
Money divides (c) For different size,
in the market. two parts namely purchase denominations must be of
transactions into colour, ete.
shape, design, weight, should
and sale.
value or Unit of account: Thus, due to above reasons, money
(b) Measure of measure of value. It helps (d)
quality of cognizibility, so that it
Money act as a have the
goods and services in identified.
know the value of can be easily stability.
terms of price. Money should not have any
payments: By (6) statement.
(c) Standard of
deferred
payment Ans. No. I do not agree with the
measure of
serving as a standardmakes borrowing and Reasons:
monetary value.
over a time, money have a stable
Money should
lending easy. store of
(a)
words, the purchasing power of
Money acts as a In other
(d) Store of value: satisfies wants in the money should be
stable.
value. Money not only This is possible because, it serves as a
measure of
present but also in future. (b) This is
goods and services.
value to exchange
due to savings. transfer can be sold and purchased in
(e) Transfer ofValue: Money enables (c) These goods requirements.
another and from
of value fromone person to instance, real future as per reasons, money should
one place to another. For agricultural (d) Thus, due
to above
assets like building, plot, shop, and can be have stability.
land etc. can be sold at one place of
purchased at another place with the help
 Reliable Serl Econonies
Explain it.
(b) refers to the system wh (a) Ani
system
Q3 Sudy the following table/figure and Ans. Barter
goods areexchanged for other gooda withe
answer the questions :
uHe of 1oney.
(4 marks each) difficulties involved in
Name the
(c)
systemn. System ar
difficulties of Barter
by bus. He gave the Ans. The coincidence of wa. (b)
Ganesh travelled to the mallticket. He purchased Problem of double
cmductor 10 coin for the mall. At the billing measure of value
Lack of common
the
many commodities fromcredit card for storage of goods
Difficulties in
counter, he gave his informd i only Problem of indivisibility of. certain gos,
clerk
but the billing had making deferred payment
cards were accepted, Sinee Ganesh
offered to . Problem of inventiot
Cetit nt home, he led to which
forgotten his debit card (d) Sueh difficulties mon
make payment by cash. led to the invention of (c)
used in the Ans, Such difficulties
ldentify the types of
money Answer in detail
(a) information. Q.6. (8 marks each)
used in the above information
Ans. Types of money Explain the differe
are as follows:
Define Money.
(1) types of money.
Token Coin ( 10)
Paper Money (Cash) Definitions of Money:
(Debit and Credit cards) Ans. Money js
Plastic Money
(a) According to Prof Crowther, (d)
(b) Explain any two of
them. acceptable as
Coins having face value anything that is generally tim# same
Ans. (i) Token coins: value, are called as means of exchange and at the value"
more than intrinsic aluminium, acts as a measure and a
store of
Tokencoins. Cheaper metals like coins.
nickel etc. are used to make these (b) According to Prof Walker, "Money
of
Paper money consistsand what money does".
(ii) Paper Money: issued Government
paper currency by Types of Money are as followS:
Central Bank of the country. It originated
by
in the form of deposit receipts issuednote (h) Electronic Money
private bankers. In India, one rupee
and all coins are issued by the Government
of India. Whereas, currency notes of higher (g) Plastic Money
denominations such as 5, ? 10, ? 20, 50,
? 100, 7200, 500, and 2000 are issued by
the Central Bank (Reserve Bank of India). () Bank Money or Credit Money
(2) (e) Paper Money

(d) Metallic Coins

(c) Metallic Money

(b) Commodity Money

(a) Animal Money

(a) What does the above figure shows?
Ans. The above figure shows the Barter System.
Economics- XI 29

(a) Animal Money: (e) Paper Money:

In primitive age (prehistorie period) Paper money consists of paper currency
'animal money' was used as a neans of issued by Government and Central Bank
exchange. of the country.
For instance, domestie animals like cows, It originated in the form of depo0sit
sheep. goats, ete. were used as money. receipts issued by private bankers.
(b) Commodity Money: In India, one rupee note and all coins are
In the initial stage of human issued by the Government of India.
development, different commodities Whereas, currency notes of higher
were used as money as an exchange. denominations sueh as 5, ? 10, 20,
For instance, animal skin, grains, t 50, 100, 3 200, 3 500, and ? 2000 are
shells, feathers, tusk, salt, rare articles issued by the Central Bank (Reserve
and stones. Bank of India).
(c) Metallic Money: (0 Bank Money or Credit Money:
Initially, pieces of metals such as gold, Bank Money refers to the bank deposits
silver, copper, aluminium, nickel, etc. kept by the people that can be withdraw
were used as medium of exchange in as and when required.
place of commodity money. It is used to create eredit money. This
However, scarcity of precious metals and can be withdrawable and transferable
lack of uniformity in metallic pieces gave on demand, by means of cheque, demand
rise to the use of metallic coins. draft, etc.
(d) Metallic Coins: (g) Plastie Money:
Due to the drawbacks of metallic money. Plastic Money is in the form of plastie
metallic coins were introduced. cards, i.e., debit and credit cards.
Metallic coins can be classified as:
Standard or full bodied coins: It is a modern day concept whereby the
use of these cards involves only transfer
Coins having face value* equal to of fund into bank account and not the
their intrinsic value*, are called as cards.
Standard or Full bodied coins.
Plastic Money is easy to use in transaction
These coins are made out of precious due to advanced technology.
metals like gold, silver etc.
(h) Electronic Money:
For your understanding: Electronic money is also known as
The *face value is the value of a coin as printed E-money. It is a monetary value that
on the coin. While, the *intrinsic value
of is stored and transferred electronically
money refers to the actual value of money. through a variety of means i.e., a mobile
phone, tablet, smart cards, computer,
Token coins:
etc.
Coins having face value more than Electronic money is used for purchases
intrinsic value, are called as Token It is backed
and transactions globally.
coins. wallets are
Cheaper metals like aluminium, by the Central Bank. Digital money.
nickel etc. are used to make these also a form of stored electronic
coins.
Do you know?
In India, all coins in circulation today are token
coins, These coins are of lower denominations
and are generally used for settling smaller
transactions. For instance, 75,7 10
 Reliable Ser, Eeonomie

(Textbook Pe No. : 11) by anybod.

() Tra
Vou should kiow transaction
(a) Legal Tender
Money: cannot be refused in
oney which s backed by law and
It isthe tender money.
any ground
curreney notes are legal
cons and
In ladia, all but there is no l
Money: final paymnents
(h) Non Legal tender by people in
the money which is generally used
I be refused.
compulion of aceeptance. It can of this money. It is also known as optional me (C) C
examples
Cheqes, billa of exchangeare (a) M
Money. acceptable as a mes
(2) Explain the funetions of "Money is anything that is generally
Crowther,
Ans. Aeeording to Prof time acts as a measure and a store
of value".
exchange and at the sane
follow8:
The funetions of money are as
Functions of Money

Primary Funetions Secondary Functions Contingent Functions

(b) E

Medium of exchange Standard of Deferred Measurement of National Income

Payments
Basis of Credit
Measure of Value or
Unit of Account Store of Value
Imparts Liquidity to Wealth
Transfer of Value
Estimation of Macro economit
variables
(Tim
(A) Primary Funcetions: (B) Secondary Functions:
(a) Medium of Exchange: (a) Standard of Deferred Q.1.
The nost important function of money Payments: (1)
is to make buying and selling of goods Payments to be made at a future date (2)
is called deferred
and services possible in the market, i.e., payments. By serving
as a standard mneasure of (3)
it
serves as a medium of exchange. payment ovet
a time, money makes (4)
Money serves as a medium of exchange borrowing and
and divides exchange
transactions into lending easy. Q1.
two parts, namely purchase and sale. Due to general acceptability, stability (1)
(b) Measure of value or Unit of of value
account: compared to other goods (2)
- Money act as a
measure of value. It helps durability, etc. money acts as a standar
of deferred payment.
(3)
to know the value of (4)
in terms of
goods and services (b) Store of
price. Value: |Q.2.
Different currencies are used to Money acts as a store of value.
the value of express only satisfies wants in the Money (1)
countries. commodity in different
in future. This is present but a (2)
For instance, Rupee in
US.A., Pound in U.K., YenIndia. Dollar in Thus, Lord J. [Link] due to savin
Keynes rightly sa
Q.3.
(1)
in Japan etc. money is a link between the prese
and future'. (2)
 Eeanonies- NI
31
c) Transfer of Value: (c) Imparts Liquidity to Wealth:
Money enables transfer of value from Money is termed as most liquid asset.
one person to another and from one place Money can be easily converted into any
ta another. asset and any asset ean be converted
For instance, real assets like building, into monev
plot, shop, agrieultural land ete. can be For instance, a person can purchase
sold at one place and can be purchased gold and if he wants he can Rell it nd
at another place with the help of money. purchase government bonds, securities
ete.
(O Contingent Funetions:
(d) Estimation of Macro
(a) Measurement and Division of National variables:
economic

Income:
Macro-Economie variables like Gross
National Income is expressed in terms of National Product (GNP), total savings,
money. Money acilities distribution of
national income among the four factors total investment, ete. can be easily
of production is in terms of monetary estimated in monetary terms.
rewards. It also facilitates:

For instance, rent, wages, interest,

protits, ete. When the value of goods and SB1GDP
services is converted in terms of money,
national income is possible. Savings
(b) Basis of Credit: Budget
Money serves as a basis of credit. Investmnents
Commercial Banks create credit money Government tax collection
on the basis of primary deposits. Distribution and
Money provides a liquid base for creation
Production
of credit money. Without the money,
credit instruments cannot operate.
THINK OVER ME I
(Marks: 20)
(Time :1 hr.)
(4)
|Q.1. (A) Complete the correlation :
: Transfer of value
(1) Primary function of money : Medium of exchange ::
(2) Basis of credit : Secondary functions of money : Standard of deferred payments.
(3) Commodity money: Shells :: ]:Credit card
(4) Divisibility : Smaller denomination:: : Easy to carry from one place to another.
14]
Q1. (B) Give economic terms :
(1) System that makes use of currency for facilitating payments.
(2) Credit instrument through which bank deposits are transferable.
means of computer hard drive or servers.
(8) Monetary value stored and transferred electronically by
government.
(4) Money not accounted for in the bank and not disclosed to the
Q.2. Answer the following questions : (Any 1)
(1) Write the Qualities of Money.
(2) What is Barter System? State the difficulties in Barter System. [8
Q.3. Answer in detail: (Any 1)
(1) Explain the functions of Money.