MONEY &

MONETARY
STANDARDS
OBJECTIVES

• Define what is money and its history

• Explain the functions of money
• Describe the characteristics of good money
• Distinguish the different types of money
• Differentiate the types of monetary standards
THE NATURE OF MONEY
WHAT IS MONEY?

• Came from the name Moneta – another name for the Roman
goddess Juno.
• Defined as a medium of exchange and as a measure of value
• Anything which could be used as a medium of exchange which is
widely acceptable for payment of goods and services
BRIEF HISTORY OF MONEY
BARTER
BARTER
USE OF VARIOUS PRODUCTS
USE OF METALS

• Gold and silver

COINS
PAPER MONEY
E- MONEY
 FUNCTIONS OF MONEY
• Medium of exchange
• To facilitate the transfer of goods and services and settle
obligations.
• Standard of value
• Measuring stick to measure the value or worth of
something.
• Store of value
• Value needed in the future can be stored as money.
• Savings in the form of money, land, jewelry, stocks etc.
• Means of deferred payment
• As legal tender, money is acceptable in payment of debts or liabilities
• Payments are made in the future
• Conveyance
• Conveyance means transport or transfer
• Money is used in the process effecting the transfer of property from one owner
to another
FORMS OF MONEY

• Commodity money ( goods or items used as payment ex. Shells,

cattle etc)
• Currency (bills and coins)
• Check
• Used by businesses and persons in conducting business and personal
transactions
• Personal checks, commercial /business checks, manager’s/ cashier’s checks,
traveller’s checks
 P
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Maker
 FORMS OF MONEY
• Bank Draft
• Issued by banks against their own account
• Also known as manager’s checks or cashier’s checks
• types:
• demand draft (sight draft)
• Time draft (post-dated)
• Local draft (single country)
• International draft (global)
• Automatic bank draft (regular intervals)
FORMS OF MONEY

• Money order
• Issued by the post office ordering the sum of money to be paid to the payee
• Warehouse receipt (WR)
• Title to goods
• Proof of possession or control of goods
KINDS OF MONEY ACORDING TO MATERIAL

•Metallic
•Paper
KINDS OF MONEY ACCORDING BASIS OF LAW

•Fiat money
•Legal tender/ representative money
CHARACTERISICS OF GOOD MONEY or Medium
of Exchange

• Scarcity
• Rare or hard to find makes it valuable
• Divisibility
• Can be broken down into smaller units/ denominations
• Portability
• Ease in handling or carrying
• Durability
• Long lasting
• Metal, plastic polymer
MONEY AND THE ECONOMY

• What to produce and how much to produce depends on monetary

considerations.
• Skills specialization developed in exchange for money which will then
be used to buy needs (wages)
• MONEY IS GENERALIZED PURCHASING POWER
 MONETARY STANDARDS
•Is the measure of the value of money
•It is developed to provide uniform basis
for measuring the value of money
•A convenient media of payment must
exist
•All forms of money must circulate at a
parity with one another
SIGNIFICANCE OF MONETARY STANDARDS

•It is made to serve the domestic

requirements
•It can be used in trade relations
with other countries with a different
monetary system
TYPES OF MONETARY STANDARDS

• COMMODITY STANDARDS
•Value of monetary unit is equal to the
value of a designated quantity of a
particular commodity
• NON- COMMODITY STANDARDS (FIAT)
•Value or purchasing power is not equal to
the value of any specific quantity of a
particular commodity
COMMODITY STANDARDS

•Gold standard
•Gold coin standard
•Gold bullion standard
•Gold exchange standard
•Bimetals
GOLD STANDARD

• Gold is used as the standard or measure of value.

• Monetary unit= weight in gold with certain fineness
• Free convertibility of gold to money and money to gold
• No restriction in use of gold
• No restriction on export of gold
ADVANTAGES OF GOLD STANDARD

• Gold knows no barriers

• Provides for stable foreign exchange rates
• Parity of prices is achieved
NON-COMMODITY STANDARDS

•Utopian paper standard

•Involuntary paper standard
•Managed currency paper standard
•Multiple table standard
•Limping standard