Money Supply

Objectives :-)



Explain what money is



Know the functions of money



state the various forms of money



Understand different instruments of present day banking.



Explain how banks create credit.



Explain the components of money supply



Explain how money supply affects the economy.



Know the need for regulating money supply.



Explain how the Reserve Bank Of India regulates money supply.







What you have learnt



Money is wanted because it gives power to purchase goods and services.



Money is anything that is acceptable to all as a medium of exchange, as a standard for deferred

payments and as a store of value.



Money can be in various forms such as notes and coins, bank cheques, demand drafts, pay orders,

bill-of-exchange or electronic cash.



Banks create credit by converting deposits into loans. They do this on the principle that not all

the people will need all the money at the same time. They maintain some amount of deposits as reservces.



Money supply is the amount of money circulating in the economy at a point of time. It is the total

of notes, coins and demand deposits with banks.

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