SATHEE: Money

Money

Money is a generally accepted medium of exchange used to facilitate trade and transactions.
It serves as a store of value, unit of account, and standard of deferred payment.
Key Characteristics:
- Portability
- Durability
- Divisibility
- Uniformity
- Limited Supply

Definition: Money made from metals like gold, silver, or copper.
Examples: Gold coins, silver coins.
Advantages:
- Durable
- Portable
Disadvantages:
- Heavy
- Not easily divisible
Historical Use: Widely used in ancient civilizations (e.g., India, Greece, Rome).

Definition: Money that has no intrinsic value but is accepted as legal tender.
Examples: Coins and paper money not backed by precious metals.
Key Fact: Token money is widely used in modern economies.

Definition: Money that derives value from government decree.
Examples: Indian Rupee (INR), US Dollar (USD).
Key Fact: Fiat money is the most common form in modern economies.
Important Date: 1971 – US abandoned the gold standard, shifting to fiat money.

Definition: Money in digital form, such as electronic transfers, mobile wallets, etc.
Examples: UPI, NEFT, RTGS, mobile wallets.
Key Fact: Digital money is increasingly used in India, especially with the rise of UPI.
Important Date: 2016 – UPI was launched in India.

Function	Description	Example
Medium of Exchange	Facilitates trade by acting as a common medium for buying and selling.	Buying groceries with cash or using UPI.
Store of Value	Money can be saved and used for future purchases.	Saving money in a bank account.
Unit of Account	Provides a standard measure for the value of goods and services.	Pricing goods in rupees (INR).
Standard of Deferred Payment	Used to settle debts at a later date.	Taking a loan and repaying it after some time.
Means of Transfer	Enables the transfer of money from one place to another.	Transferring funds via NEFT or RTGS.

Money Supply in India: Measured by RBI as M1, M2, M3, and M4.
M1 = Currency with the public + demand deposits with banks + other deposits with the RBI.
M3 = M1 + time deposits with banks.
M4 = M3 + total deposits with post offices (excluding provident funds).
Important Date: 1957 – India adopted a decimal currency system (1 rupee = 100 paise).
Important Date: 1962 – India introduced the rupee symbol (₹).
Important Term: Inflation – Rise in general price level, affecting the value of money.
Important Term: Deflation – Fall in general price level, leading to increased purchasing power.
Important Term: Monetary Policy – Tools used by RBI to control money supply and interest rates.

Type	Intrinsic Value	Backing	Portability	Durability	Common Use
Metallic	High	None	Low	High	Historical
Paper	None	Legal	High	Low	Modern
Token	None	Legal	High	Low	Modern
Fiat	None	Legal	High	Low	Modern
Digital	None	Legal	High	Low	Modern

Legal Tender: Money that must be accepted if offered in payment of a debt.
Counterfeit Money: Fake money that mimics genuine currency.
Inflation Rate: The percentage increase in the general price level over a period.
Deflation Rate: The percentage decrease in the general price level over a period.
Monetary Policy: Central bank’s actions to control money supply and interest rates.
Quantitative Easing (QE): Central bank’s purchase of financial assets to increase money supply.
Open Market Operations (OMO): RBI’s buying and selling of government securities to control liquidity.

India’s Currency System: Transition from metallic to fiat money with the establishment of RBI in 1935.
Digital Payments Growth: UPI has revolutionized digital payments in India, with over 10 billion transactions in 2023.
Money Supply Management: RBI uses tools like repo rate, reverse repo rate, and CRR to manage money supply.
Historical Context: The use of coins in India dates back to the Maurya Empire (c. 322–185 BCE), with the first standardized coins issued by Chandragupta Maurya.