MONEY

Money
Money finds its origin in the need to facilitate exchange. Therefore money is generally defined as a thing that is commonly accepted as a medium of exchange.Exchange is the way of life.In fact, Hicks defines economy as a system of Mutual exchanges.It means people are depend on each other for the satisfaction of wants, and this interdependence implies exchange of goods and services.Means you do this thing for me and i do that thing for you.Otherwise, existence becomes imposssible in a world of multiplicity of wants.
When wants were not so multiple, goods are exchange for goods. This system of exchange was known as Barter system. But with the multiplicity of wants and greateneed for exchange, barter system proved to be an inefficient system of exchange.It is then that Man invented Money -thing that was commonly accepted as a Medium of exchange.Intially, Metals Coins of gold and silver were introduced,andsubsequentlly, Alloy
Metals came to be used for coinage ,besides the introduction of Paper Money.And, now is the age of Plastic Money in the form of debit cards and credit cards. Thus, money finds its origin in the need to facilitate exchange; hence, it came to be defined as "A thing that is commonly accepted as a medium of exchange."
Legally, money is anything proclaimed by law as a medium of exchange.
Currency(paper note and coins together called currency) ia also called Fiat money because it commands fiats of the government.
Functional definition of money refers to money as anrything that performs four basic functions, viz.(i) it serves as a medium of exchange
(ii)it serves as a standard unit of value
(iii)it serves as a means for future/contractual payments or standard of deferred payments, and(iv)it serves as a store of value.
Broadly money is classified as,
(i) Full bodied money
(ii) Representative full bodied money
(iii)Credit money.
Functions of money are classified into following three categories:

• Primary/Main function

(i)Medium of exchange
(ii)Measure of value or unit of value.

• Secondary/subsidiary functions

(i)Standard of Deferred payments
(ii)Store of value
(iii)Transfer of value

• Contigent functions

(i)Basis of credit creation
(ii)Measurement of maximum satisfaction
(iii)Distributon of maximum satisfaction
(iv)Bearer of option
(v)Guarantee of solvency
(vi)Increase in the Liquidity of capital
W.R.L. Coulborn and Pual Einzig have classified all the functions of money into Two broad categories, viz., Static functions and Dynamic function.
(i) Static function: Static function of money refers to coventional, fixed, technical, and passive functions of money.Such functions only help to regulate the economic system;they do not infuse any element of dynamism into the system.These basically include the primary and secondary functions of money, such as medium of exchange, measure of value, store of value, transfer of value, and standard for deferred payments.
(ii)Dynamic Function:Dynamic function of money refer to those functions of money which impart dynamism to the economy. By imparting dynamism, we mean to ensure stability of price level as well as to improve the level of income and employment. Dynamic functions also include such functions of money as increasing the liquidity of capital and serving as the basis of credit.
All such functions of money make it amply clear that money is a Dynamic force.
Indian Monetary System

• MONEY SUPPLY
• The concept of money

Supply of money is as tock concept.It refers to total stock of money held by the people of a country at a point of time.Supply of money includes only that stock of money which is held by people, other than the suppliers of money themselves.
Who Supplies Money
In the modern times,the sources of supply of money are Government, Central bank of the country and commercial banks. In India ,it is Ministry of finance that issues one-rupee notes and all the coins. Money is mainly supplied by the Reserve Bank Of India which is the central bank of the country. RBI issues currency on the basis of minimum reserve system. Under this system, Reserve Bank has to maintain a minimum reserves of Rs.200 Crore in the form of Gold and Foreign securities. Of this reserves,value of the gold must be Rs.115 crore.Commercial banks create credit on the basis of demand deposits. When the commercial banks provide credit to the peopleor buy the securities sold by the Rserve Bank Of India then they add to the suply of money.On the other hand, when they contract credit ,there is fall in the supply of money. Expansion or Contraction of money supply by the commercial banks is Governed by the monetary policy of the Reserve Bank Of India.