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KARNATAKA class 12 commerce Economics fast track revision notes

KARNATAKA class 12 commerce Economics fast track revision notes:- we will provide complete details of KARNATAKA class 12 commerce Economics fast track revision notes in this article.

KARNATAKA class 12 commerce Economics fast track revision notes

KARNATAKA class 12 commerce Economics fast track revision notes:-MONEY AND BANKING

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KARNATAKA class 12 commerce Economics fast track revision notes

MEANING OF MONEY: Money is anything which is generally accepted as medium of exchange, measure of value, store of value and as means of standard of deferred payment.

FUNCTIONS OF MONEY: Functions of money can be classified into Primary and Secondary

Primary/Basic functions:-

  1. Medium of Exchange: – It can be used in making payments for all transactions of goods and services.
  2. Measure /Unit of value: – It helps in measuring the value of goods and services. The value is usually called as price. After knowing the value of goods in single unit (price) exchanges become easy.

Secondary functions:-

  1. Standard of deferred payments: Deferred payments referred to those payments which are to be made in near future. Money acts as a standard deferred payment due to the following reasons:
    1. Value of money remains more or less constant compared to other commodities.
    2. Money has the merit of general acceptability.
    3. Money is more durable compare to other commodity.
  2. Store of value: Money can be stored and does not lose value Money acts as a store of value due to the following reasons:
    1. It is easy and economical to store.
    2. Money has the merit of general acceptability.
    3. Value of money remains relatively constant

KARNATAKA class 12 commerce Economics fast track revision notes:-MONEY HAS OVERCOME THE DRAW BACKS OF BARTER SYSTEM:

  1. Medium of Exchange: Money has removed the major difficulty of the double coincidence of wants.
  2. Measure of value: Money has become measuring rod to measure the value of goods and services and is expressed in terms of price.
  3. Store of value: It is very convenient, easy and economical to store the value and has got general acceptability which was lacking in the barter system.
  4. Standard of deferred payments: Money has simplified the borrowing and lending of operations which were difficult under barter system. It also encourages capital formation.

MONEY SUPPLY: refers to total volume of money held by public at a particular point of time in an economy.

M1=currency held by public + Demand deposits + other deposits with Reserve Bank of India.

M2=M1+saving deposits with post office saving bank

M3=M1+net time deposit with the bank

M4=M3 + total deposits with post office saving bank excluding national saving certificate

HIGH POWERED MONEY: Refers to, currency with the public (notes +coins) and cash reserve of banks.

KARNATAKA class 12 commerce Economics fast track revision notes:-CENTRAL BANK

MEANING: An apex body that controls, operates, regulates and directs the entire banking and monetary structure of the country.

KARNATAKA class 12 commerce Economics fast track revision notes:-FUNCTIONS OF CENTRAL BANK:

  1. Currency authority or bank of issue: Central bank is a sole authority to issue currency in the country. Central Bank is obliged to back the currency with assets of equal value (usually gold coins, gold bullions, foreign securities etc.,)

    1. Advantages of sole authority of note issue:

      1. Uniformity in note circulation
      2. Better supervision and control
      3. It is easy to control credit
      4. Ensures public faith
      5. Stabilization of internal and external value of currency
  2. Banker to the Government: As a banker it carries out all banking business of the Government and maintains current account for keeping cash balances of the government. Accepts receipts and makes payments for the government. It also gives loans and Advances to the government.
  3. Banker’s bank and supervisor: Acts as a banker to other banks in the country—

    1. Custodian of cash reserves:- Commercial banks must keep a certain proportion of cash reserves with the central bank (CRR)
    2. Lender of last resort: – When commercial banks fail to need their financial requirements from other sources, they approach Central Bank which gives loans and advances.
    3. Clearing house: – Since the Central Bank holds the cash reserves of commercial banks it is easier and more convenient to act as clearing house of commercial banks.
  4. Controller of money supply and credit: – Central Bank or RBI plays an important role during the times of economic fluctuations. It influences the money supply through quantitative and qualitative instruments. Former refers to the volume of credit and the latter refers to regulate the direction of credit.
  5. Custodian of foreign exchange reserves. Another important function of Central Bank is the custodian of foreign exchange reserves. Central Bank acts as custodian of country’s stock of gold and foreign exchange reserves. It helps in stabilizing the external value of money and maintaining favorable balance of payments in the economy.

KARNATAKA class 12 commerce Economics fast track revision notes:-QUANTITATIVE INSTRUMENTS:

  1. Bank Rate policy: – It refers to the rate at which the central bank lends money to commercial banks as a lender of the last resort. Central Bank increases the bank rate during inflation (excess demand) and reduces the same in times of deflation (deficient demand)
  2. Open Market Operations: It refers to the buying and selling of securities by the Central Bank from/ to the public and commercial banks. It sells government securities during inflation/excess demand and buys the securities during deflation/deficient demand.
  3. Legal Reserve Ratio: R.B.I. can influence the credit creation power of commercial banks by making changes in CRR and SLR

    1. Cash Reserve Ratio (CRR): It refers to the minimum percentage of net demand and time liabilities to be kept by commercial banks with central bank.
    2. Reserve Bank increases CRR during inflation and decreases the same during deflation
    3. Statutory Liquidity Ratio (SLR): It refers to minimum percentage of net demand and time liabilities which commercial banks required to maintain with themselves. SLR is increased during inflation or excess demand and decreased during deflation or deficient demand.

KARNATAKA class 12 commerce Economics fast track revision notes:-QUALITATIVE INSTRUMENTS:

  1. Margin Requirements: It is the difference between the amount of loan and market value of the security offered by the borrower against the loan. Margin requirements are increased during inflation and decreased during deflation.
  2. Moral suasion: It is a combination of persuasion and pressure that Central Bank applies on other banks in order to get them act in a manner in line with its policy.
  3. Selective credit controls: Central Bank gives direction to other banks to give or not to give credit for certain purposes to particular sectors.

KARNATAKA class 12 commerce Economics fast track revision notes

Important Note – Preparing for XI & XII Commerce?
CAKART provides Indias top faculty each subject video classes and lectures – online & in Pen Drive/ DVD – at very cost effective rates. Get video classes from CAKART.in. Quality is much better than local tuition, so results are much better.
Watch Sample Video Now by clicking on the link(s) below – 
For any questions Request A Call Back  

Recommended Read:-KARNATAKA class 12 commerce Economics fast track revision notes

KARNATAKA class 12 commerce Economics fast track revision notes

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