DEFINITION OF MONEY ACCORDING TO THE RESERVE BANK OF INDIA
Key Words We Learnt So Far
- Double Coincidence of Wants: When both the parties have to agree to sell and buy each other’s commodities. This is known as the double coincidence of wants.
- Medium of Exchange: Money acts as an intermediate in the exchange processes, it is known as the medium of exchange.
- Currency: Modern forms of money include currency – paper notes and coins.
- Deposits: A sum of money paid into a bank.
Reserve money (m0):- currency in circulation+ deposits of commercial banks in rbi-loans granted by rbi to the govt. + assests of the rbi abroad – it is the most liquid state of money where in the assests could be readily converted into money.
(m1):- m0 + the amount of money deposited by the customers in differnt banks in differnt acccounts viz., saving, current recurring, time deposits etc.
(m2):- m1 + amount of money deposited by the customer in the post office in postal accounts subject to the maximum limits of rs.100,000.
(m3):- m1 +all types of the term deposits +govt. bonds, shares debentures, securities etc.
(m4):- m3 +all sorts of saving accounts in the post office except national saving certificates
Different countries different currencies
- USA – dollar
- Britain – Pound Sterling
- Canada – Canadian dollar
- Singapore – Singapore dollar
- China – Chinese Yuan renminbi
- Japan – Japanese yen
- Australia – Australian dolla
- Sri Lanka – Sri Lankan rupee
Deposits money in Banks
- People need only some currency for their day-to-day needs.
- People deposit the extra money with the banks by opening a bank account in their name.
- Banks accept the deposits and also pay an interest rate on the deposits.
- In this way people’s money is safe with the banks and it earns an interest.
- People also have the provision to withdraw the money as and when they require.
- Since the deposits in the bank accounts can be withdrawn on demand, these deposits are called demand deposits.