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Money and Banking | O Level Economics 2281 & IGCSE Economics 0455 | Detailed Free Notes To Score An A Star (A*)

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  • Money
    • Something that is generally acceptable as a means of payment
  • Barter System
    • Exchange one good for another or one service for another
    • However, such system can’t work in global trade.
    • Co-existence of needs will not always occur that is mandatory for this purpose.
    • Profitability is difficult to determine in this as well
    • Therefore, money required to ensure better sales and purchase.
  • Features of money
    • It is durable
      • Must not get destroyed easily
    • Portable
      • Should be easy to carry
    • Homogenous
      • The notes must be same type
    • Divisible
      • Can be divided into smaller units
    • Uniform
      • All notes of same type must be the same
    • Generally Acceptable
      • Must be acceptable otherwise it loses the purpose of being used for purchase and sales
    • Legal tender
      • Something that you are required by law to accept in settlement of a debt
    • In limited supply
      • If unlimited, it will lose its valueu
    • Have no inherent value
      • The note itself has no value
      • The amount printed on it gives it value
  • Functions of Money
    • Medium of exchange
      • We buy and sell through it
      • We sell and get money in exchange
      • We buy and pay money for it.
    • Measure of value
      • We can measure what the value of something is
      • It is also called unit of account which means we can compare items for example if a book is 1 USD and a newspaper is 5 USD, then 1 newspaper is equal to 5 books in monetary value
    • Store of value
      • Money can retain value over time
      • I can’t store eggs for more than a month
      • I can keep money saved for years
    • Standard for deferred payments
      • We can use money to pay our debts and credits, as on purchases
  • Banking
    • Financial intermediaries
      • Take money from those who have extra
      • Give money to those who need it
      • Charge more interest on borrowers than you give them who deposit
    • Commercial banks
      • Provide services to consumers and corporations
        • Accept deposits as savings
        • Allow method for customers to pay and receive money
        • Loans to private businesses and people
        • Selling and shares on customer’s behalf
        • Insurance provided
        • Exchange for foreign currencies offered
        • Financial planning advice offered as well
    • Central Banks
      • The main bank that provides banking services to other banks
      • Such as State Bank of Pakistan
      • Functions
        • Notes and coins issues
        • Payments of government made
        • National debt managed
        • Controlling the baking system
        • Holding deposits of commercial banks
        • Allow transfer between commercial banks
        • Lender of last resort to commercial banks
          • To avoid that them going bankrupt
        • Gold and foreign currency reserves managed
        • Monetary policy is operated
Hunain Zia

Hunain Zia has previously achieved considerable success in the high-school educational stream, gaining a massive 154 Total A Grades and 7 Major Distinctions, a process in which he broke/ set 11 different world records, including the most A grades ever achieved, most subjects ever appeared in, most distinctions, gaining distinctions across two separate boards (Pearson Edexcel and CAIE) within the same year/ ever, and even 19 hours of constant examination. All records stand intact today. Hunain pursued his Honors Accounting Degree from the prestigious Bentley University, and then completed an LLB (in Honors) from University of London. Currently, he manages multiple social and commercial projects, has founded digital streams and works tirelessly in the education sector.

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