evolution of money is development stage of history of money and cash in economics

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1. Economics:Economics:
Done by Haniya Hedayth Done by Haniya Hedayth
Class:10Class:10
thth
–A –A
Roll no: 08Roll no: 08

2. EVOLUTION OF MONEYEVOLUTION OF MONEY
Money was developed according to needs & Money was developed according to needs &
Requirements.Requirements.
Main aim was to remove the shortcomings of Main aim was to remove the shortcomings of
the Barter System.the Barter System.

3. DIFFERENT STAGES OF DIFFERENT STAGES OF
EVOLUTION OF MONEYEVOLUTION OF MONEY
1.1.COMMODITY MONEYCOMMODITY MONEY
2.2.METALIC MONEYMETALIC MONEY
3.3.PAPER MONEYPAPER MONEY
4.4.CREDIT MONEYCREDIT MONEY
5.5.ELECTRONIC MONEYELECTRONIC MONEY

4. 1. COMMODITY MONEY1. COMMODITY MONEY
When different commodities were used as a medium When different commodities were used as a medium
of exchange (BARTER SYSTEM)of exchange (BARTER SYSTEM)
Cow Heads, Goats, Axes, Dried Fishes etc were Cow Heads, Goats, Axes, Dried Fishes etc were
used as medium of exchange.used as medium of exchange.

5. 1. COMMODITY MONEY1. COMMODITY MONEY
Barter System had different problem like:Barter System had different problem like:
1.1.Storing ProblemStoring Problem
2.2.Durability problemDurability problem
3.3.Transportation problemTransportation problem
4.4.Divisibility problem Divisibility problem

6. 2. METALLIC MONEY2. METALLIC MONEY
The next step in the evolution was the discovery The next step in the evolution was the discovery
of precious metals like Gold, Silver, Copper.of precious metals like Gold, Silver, Copper.
“ “ Metallic Money consist of coins made of Metallic Money consist of coins made of
Gold, Silver, Copper or nickel as a mode of Gold, Silver, Copper or nickel as a mode of
payment.”payment.”

7. 2. METALLIC MONEY2. METALLIC MONEY
UnCoined MetalsUnCoined Metals
Metals were not used as a coin but as a Bullion.Metals were not used as a coin but as a Bullion.
This created the problem of measuring the This created the problem of measuring the
weight & Value.weight & Value.
Supply of money also became problem when the Supply of money also became problem when the
mines were fully used up or new mines were mines were fully used up or new mines were
discovered.discovered.
Transportation & Storage problem were also Transportation & Storage problem were also
there.there.

8. 2. METALLIC MONEY2. METALLIC MONEY
Coined Metals.Coined Metals.
As a next step, standard coins were created.As a next step, standard coins were created.
They had a standard weight & value.They had a standard weight & value.
Problem of un coined metals started here as Problem of un coined metals started here as
well.well.

9. 2. METALLIC MONEY2. METALLIC MONEY
Metallic money can be: Metallic money can be:
FULLY BODIEDFULLY BODIED
Whose Face Value is equal to the value of Whose Face Value is equal to the value of
metal contained in it.metal contained in it.
TOKEN MONEYTOKEN MONEY
Its Face Value is Higher than Intrinsic Value Its Face Value is Higher than Intrinsic Value
(Value of Metal)(Value of Metal)

10. 3. PAPER MONEY3. PAPER MONEY

11. 3. PAPER MONEY3. PAPER MONEY
When paper currency was introduced as a mode When paper currency was introduced as a mode
of payment.of payment.
Originated as a receipt issued by Goldsmiths.Originated as a receipt issued by Goldsmiths.
These receipts were then later on used for These receipts were then later on used for
payments.payments.
Difference in the value of receipts was becoming Difference in the value of receipts was becoming
a problem then. a problem then.

12. 3. PAPER MONEY3. PAPER MONEY
PAPER MONEYPAPER MONEY
Refers to the Notes issued by the State or by Refers to the Notes issued by the State or by
the Bank, usually the Central bank.the Bank, usually the Central bank.
Paper Money can be:Paper Money can be:
1.1.Representative Paper Money.Representative Paper Money.
2.2.Convertible Paper Money.Convertible Paper Money.
3.3.Fait Paper Money.Fait Paper Money.

13. 3. PAPER MONEY3. PAPER MONEY
Representative Paper Money.Representative Paper Money.
It is that money which is fully backed by equivalent It is that money which is fully backed by equivalent
metallic reserves.metallic reserves.
Convertible Paper MoneyConvertible Paper Money
Which is convertible into coins on demand.Which is convertible into coins on demand.
Fait Paper MoneyFait Paper Money
Which is not redeemable or convertible into Gold or Which is not redeemable or convertible into Gold or
Silver on demand. It is accepted because it is declared Silver on demand. It is accepted because it is declared
legal tender by the issuing authority and has general legal tender by the issuing authority and has general
acceptance as a medium of exchange. The intrinsic acceptance as a medium of exchange. The intrinsic
value of Fait money is Nil.value of Fait money is Nil.

14. 4. CREDIT MONEY4. CREDIT MONEY
Includes Bank money (different instruments Includes Bank money (different instruments
offered by the Banks.)offered by the Banks.)
Cheques, Drafts, P.O, T.C are examples.Cheques, Drafts, P.O, T.C are examples.
Convenient, Safe and easily convertible into Convenient, Safe and easily convertible into
cash.cash.
Its like Near Money. Its like Near Money.

15. 5. ELECTRONIC MONEY5. ELECTRONIC MONEY

16. 5. ELECTRONIC MONEY5. ELECTRONIC MONEY
Electronic money (also known as e-money, Electronic money (also known as e-money,
electronic cash, electronic currency, digital electronic cash, electronic currency, digital
money, digital cash or digital currency) refers money, digital cash or digital currency) refers
to money or scrip which is exchanged only to money or scrip which is exchanged only
electronically. Typically, this involves use of electronically. Typically, this involves use of
computer networks, the internet and digital computer networks, the internet and digital
stored value systems. stored value systems.

17. CHARACTERISTICS OF MONEYCHARACTERISTICS OF MONEY

18. CHARACTERISTICS OF MONEYCHARACTERISTICS OF MONEY
General Acceptability.General Acceptability.
Stability of Value.Stability of Value.
Transportability.Transportability.
Storeability.Storeability.
Divisibility.Divisibility.
Homogeneity.Homogeneity.
Cognizability.Cognizability.
Malleability.Malleability.

19. LEGAL TENDER.LEGAL TENDER.
“ “ Means of payment, which has state’s sanction Means of payment, which has state’s sanction
behind it and can be used to settlement of behind it and can be used to settlement of
Debt obligations”Debt obligations”
Debtor can compel creditor to accept it.Debtor can compel creditor to accept it.
1.1.Unlimited Legal Tender.Unlimited Legal Tender.
2.2.Limited Legal Tender.Limited Legal Tender.

20. LEGAL TENDER.LEGAL TENDER.
Unlimited Legal Tender.Unlimited Legal Tender.
Money in terms of which debt can be legally Money in terms of which debt can be legally
paid up to any amount.paid up to any amount.
All type of Currency Notes.All type of Currency Notes.
Limited legal tender.Limited legal tender.
Money in which debt can be paid to a certain Money in which debt can be paid to a certain
limit.limit.
50 Paisa Coins.50 Paisa Coins.

21. MEASURING MONEYMEASURING MONEY
Changes in the amount of money in the Changes in the amount of money in the
economy are related to changes in Interest rates, economy are related to changes in Interest rates,
Economic Development & Inflation.Economic Development & Inflation.
Inflation: rise in price level; makes the value of Inflation: rise in price level; makes the value of
the money less.the money less.
Measured by Measured by Money Aggregates M1, M2, M3.Money Aggregates M1, M2, M3.

22. MEASURING MONEYMEASURING MONEY
M1:M1:
Currency and checkable Deposit Accounts and other bank Currency and checkable Deposit Accounts and other bank
money instruments.money instruments.
Most Liquid assets of a Financial System.Most Liquid assets of a Financial System.
M2:M2:
M1 + Those assets which can’t be used directly as a mode of M1 + Those assets which can’t be used directly as a mode of
payment and converted into currency.payment and converted into currency.
Small denomination Time deposit etc.Small denomination Time deposit etc.
M3:M3:
M2+ Long term investments.M2+ Long term investments.
Assets which are important to large institution and not to Assets which are important to large institution and not to
individuals.individuals.

23. Thank you
Thank you