5. Money and Banking – Basic Concepts
Money serves as a medium of exchange, a unit of account, and a store of value in the economy. Various forms of money exist, including commodity and fiat money. Banks play a crucial role as intermediaries between savers and borrowers, while the Reserve Bank of India regulates the banking sector and manages monetary policy, supporting economic development through credit and investment mobilization.
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What we have learnt
- Money acts as a medium of exchange, unit of account, store of value, and enables deferred payments.
- Good money possesses characteristics such as durability, portability, and stability of value.
- Banks facilitate economic transactions by accepting deposits and providing loans, while the RBI oversees monetary policy to maintain financial stability.
Key Concepts
- -- Money
- Anything that is generally accepted as a medium of exchange for goods and services.
- -- Functions of Money
- The roles money plays in the economy, including facilitating transactions, measuring value, storing value, and enabling credit.
- -- Commercial Banks
- Financial institutions that accept deposits and extend loans, acting as intermediaries in the financial system.
- -- Central Bank
- The primary monetary authority in a country, responsible for regulating the banking system and implementing monetary policy.
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