Money is the stock of assets that can be readily used to make actions. The stock of money is made of the rupees in the hands of the public. The three main uses of money are to serve as a
In a system without money, we can either be completely self-sufficient, or use a barter economy. The latter requires a “double coincidence of wants” - each person has something that the other wants. Nowadays, this is highly unlikely with the huge variety in goods.
Money allows for more indirect transactions. Liquidity refers to the ease with which an asset can be converted to the economy’s medium of exchange. For example, money is the most liquid asset, stocks and bonds are still relatively liquid (but less so than money), and an antique painting is less liquid.
Fiat money is money by declaration. It has no intrinsic value. For example, rupee or dollar.
Commodity money on the other hand does have intrinsic value and can be used for some purpose. For example, gold or tobacco. When we use gold as money, the economy is said to be on a gold standard.
There is a general shift from commodity money to Fiat money, primarily because the latter is much more standardized.
The money supply or money stock refers to the amount of money available in the economy. It includes both currency (the paper bills and coins in the hands of the public) and demand deposits (balances in savings accounts that depositors can access on demand).
If most sellers accept cheques, assets in savings accounts are as convenient as currency.
<!– There are three types of money in India: