Money Banking & Finance (MBF Notes)

Q: Define money. Discuss the origin and growth of money?



The word money is derived from the Latin word “Moneta” which was the surname of the Roman Goddess of Juno in whose temple money was coined. The actual of money can be more accurately defined as:


Definitions of Money


  1. According to Crowther:

Anything that is generally accepted as a medium of exchange & at the same time acts as a measure and the store of value is called money.

  1. According to D.H.Cole:

‘Purchasing power with which something can be bought is called money

According to J.M.Kevnes:

“Money is that by the delivery of which debt contracts and price contracts are discharged and in the shape of which purchasing power is  held”

According, to Walker:

“Money is what money does”

5    The legal definition of money:

Some economists define money in legal terms saying that: “Anything which the state declares money is money. Such money possesses general acceptability and has the legal power to discharge debts From the above-given definitions, we come to this point that anything which performs the following five functions is termed as money.

  1. It is generally accepted as a medium of exchange.
  2. It measures the value of commodities & services.
  3. It is used as a standard of deferred payments.
  4. It stores the value of commodities & services.
  5. It is approved by the govt.

                                                      M O N EY



The medium of                    Measure of        Standard of Deferred         Stores value                   Govt.

Exchange                          value                      payments                     of commodity           approval


Evolution or Growth of Money


The origin of money is unknown money that we use today has not sprung up overnight. Infect it has passed through centuries of evolution to reach in its present form. The evolution of money and its growth can be divided into the following parts.


  1. Barter System:

In barter age, there was no money. Goods were exchanged for goods. But there were many inconveniences such as the double coincidence of wants, absence of unit of value, lack of common measure, etc.


  1. Metallic age:

With the passage of time, man found gold and silver and other precious metals and star: using them as medium of exchange but they also have disadvantages such as no proper valuation, difficulty in transportation, difficulty in weight and measurements etc.


  1. Coins:

Coinage was the first great invention in the evolution of money. For a long period of time the coins of gold and silver served as money.


  1. Paper Money:

People of the olden age keep their gold coins and bars with goldsmiths. The receipts issued by goldsmiths become medium of exchange. These receipts were the start of paper money. Paper money itself passed through three stages of evolution. These are:

  1. Representative Paper money
  2. Convertible Paper money
  3. Inconvertible Paper money




This is how the money originated, developed, and reached the stage where we are using it today. The form in which we use it today is the best one for today’s progressive world.


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