MONETARY ECONOMICSCONCEPTS OF MONEY

Content History and Evolution of Money Monetary SystemsPayment Standards DefinitionFunctions of Money Measurement of Money Supply Discussion Concepts of Money in Islam

From Barter to Money Barter is the exchange of a good or service for another good or service Barter requires a ldquodouble coincidence of wantsrdquo for a transaction to take

place A barter economy has fewer exchanges exchanges that are made are more

time consuming and less specialization is possible The frustrations associated with barter led people to create MONEY Over time may different items have served as money To serve as money an item must be SCARCE and

Portable Durable Divisible

Familiar (Uniform) Acceptable Stable in Value

Various Forms of Money

The use of cattle inexchange can be tracedback as far as 9000-6000 BC

Cowrie shells beingused as money can betraced to China in 1200BC

An Okpoho manilla (orbracelet) was an early form of money in Nigeria

The Katanga Cross was an archaic form ofmoney from WestAfrica

Bronze and copper replicas of shells weremanufactured in China by the end of the Stone Age and the Lydians (modern Turkey) coined gold and silver around 560 BC

Other Forms of Money- Whalersquos teeth- Bread- Spices

On the Micronesian Island of Yap huge limestone rocks wereformed into coins1048710 Some of these coins were 9-12feet in diameter and weighed several tons

Monetary Payment Systems

Barter Economy

Commodity Money

Representative to Gold-backed money

Fiat Money and the Future

Commodity Money item which is useful in its intrinsic value as well as its monetary properties

Began with banks issuing paper receipts to depositors indicating that the receipt is redeemable for the precious goods being stored

Representative money made the practice of fractional reserve banking possible

Paper Currency

This money is not backed by reserves of another commodity

The money is given value by government fiat (Latin for ldquolet it be donerdquo) or decree

Functions of Money Medium of Exchange ndash acts as a go-between to make it easier

to buy and sell goods and services or pay debts Allows buyers and sellers to avoid the difficulties associated with barter exchanges

Store of Value ndash allows people to transfer the purchasing power of their present money income or wealth into the future ideally without a loss of value

Unit of Account ndash serves as a way to measure and compare the value of goods and services in relation to one another It also allows people to keep accurate financial records

Measurement of Money Supply

Measurement of Money Supply-Malaysia

M1currency and demand deposits held by the private

sector

M2 = M1 +savings deposits + fixed deposits of all maturities + net issues of

NCD + repo transactions effected [ofto the private sector]

[by the commercial banks]

M3 = M2 + savings deposits + fixed deposits of all maturities + net issues of

NCD + repo transactions effected [ofto the private sector]

[by other banks]

Money supply (or Money Stock)ndash The amount of money in an economy that is easily available for use in payments It is not just coins and notes in circulation

First Discussion

Do the official measures of Money Stock (M1 M2 and M3) accurately reflect the quantity of money in the economy

When we state M2 = Currency + Demand Deposits + Savings Deposits + Fixed Deposits + NCD + REPO what does

this mean

Second Discussion

What is the concept of Money in Islam

Must money in an Islamic economy be in the form of gold

Is fiat money incompatible with Islamic principles

• MONETARY ECONOMICS
• Content
• From Barter to Money
• Various Forms of Money
• Monetary Payment Systems
• Functions of Money
• Measurement of Money Supply
• First Discussion
• Second Discussion

Content History and Evolution of Money Monetary SystemsPayment Standards DefinitionFunctions of Money Measurement of Money Supply Discussion Concepts of Money in Islam

From Barter to Money Barter is the exchange of a good or service for another good or service Barter requires a ldquodouble coincidence of wantsrdquo for a transaction to take

place A barter economy has fewer exchanges exchanges that are made are more

time consuming and less specialization is possible The frustrations associated with barter led people to create MONEY Over time may different items have served as money To serve as money an item must be SCARCE and

Portable Durable Divisible

Familiar (Uniform) Acceptable Stable in Value

Various Forms of Money

The use of cattle inexchange can be tracedback as far as 9000-6000 BC

Cowrie shells beingused as money can betraced to China in 1200BC

An Okpoho manilla (orbracelet) was an early form of money in Nigeria

The Katanga Cross was an archaic form ofmoney from WestAfrica

Bronze and copper replicas of shells weremanufactured in China by the end of the Stone Age and the Lydians (modern Turkey) coined gold and silver around 560 BC

Other Forms of Money- Whalersquos teeth- Bread- Spices

On the Micronesian Island of Yap huge limestone rocks wereformed into coins1048710 Some of these coins were 9-12feet in diameter and weighed several tons

Monetary Payment Systems

Barter Economy

Commodity Money

Representative to Gold-backed money

Fiat Money and the Future

Commodity Money item which is useful in its intrinsic value as well as its monetary properties

Began with banks issuing paper receipts to depositors indicating that the receipt is redeemable for the precious goods being stored

Representative money made the practice of fractional reserve banking possible

Paper Currency

This money is not backed by reserves of another commodity

The money is given value by government fiat (Latin for ldquolet it be donerdquo) or decree

Functions of Money Medium of Exchange ndash acts as a go-between to make it easier

to buy and sell goods and services or pay debts Allows buyers and sellers to avoid the difficulties associated with barter exchanges

Store of Value ndash allows people to transfer the purchasing power of their present money income or wealth into the future ideally without a loss of value

Unit of Account ndash serves as a way to measure and compare the value of goods and services in relation to one another It also allows people to keep accurate financial records

Measurement of Money Supply

Measurement of Money Supply-Malaysia

M1currency and demand deposits held by the private

sector

M2 = M1 +savings deposits + fixed deposits of all maturities + net issues of

NCD + repo transactions effected [ofto the private sector]

[by the commercial banks]

M3 = M2 + savings deposits + fixed deposits of all maturities + net issues of

NCD + repo transactions effected [ofto the private sector]

[by other banks]

Money supply (or Money Stock)ndash The amount of money in an economy that is easily available for use in payments It is not just coins and notes in circulation

First Discussion

Do the official measures of Money Stock (M1 M2 and M3) accurately reflect the quantity of money in the economy

When we state M2 = Currency + Demand Deposits + Savings Deposits + Fixed Deposits + NCD + REPO what does

this mean

Second Discussion

What is the concept of Money in Islam

Must money in an Islamic economy be in the form of gold

Is fiat money incompatible with Islamic principles

• MONETARY ECONOMICS
• Content
• From Barter to Money
• Various Forms of Money
• Monetary Payment Systems
• Functions of Money
• Measurement of Money Supply
• First Discussion
• Second Discussion

From Barter to Money Barter is the exchange of a good or service for another good or service Barter requires a ldquodouble coincidence of wantsrdquo for a transaction to take

place A barter economy has fewer exchanges exchanges that are made are more

time consuming and less specialization is possible The frustrations associated with barter led people to create MONEY Over time may different items have served as money To serve as money an item must be SCARCE and

Portable Durable Divisible

Familiar (Uniform) Acceptable Stable in Value

Various Forms of Money

The use of cattle inexchange can be tracedback as far as 9000-6000 BC

Cowrie shells beingused as money can betraced to China in 1200BC

An Okpoho manilla (orbracelet) was an early form of money in Nigeria

The Katanga Cross was an archaic form ofmoney from WestAfrica

Bronze and copper replicas of shells weremanufactured in China by the end of the Stone Age and the Lydians (modern Turkey) coined gold and silver around 560 BC

Other Forms of Money- Whalersquos teeth- Bread- Spices

On the Micronesian Island of Yap huge limestone rocks wereformed into coins1048710 Some of these coins were 9-12feet in diameter and weighed several tons

Monetary Payment Systems

Barter Economy

Commodity Money

Representative to Gold-backed money

Fiat Money and the Future

Commodity Money item which is useful in its intrinsic value as well as its monetary properties

Began with banks issuing paper receipts to depositors indicating that the receipt is redeemable for the precious goods being stored

Representative money made the practice of fractional reserve banking possible

Paper Currency

This money is not backed by reserves of another commodity

The money is given value by government fiat (Latin for ldquolet it be donerdquo) or decree

Functions of Money Medium of Exchange ndash acts as a go-between to make it easier

to buy and sell goods and services or pay debts Allows buyers and sellers to avoid the difficulties associated with barter exchanges

Store of Value ndash allows people to transfer the purchasing power of their present money income or wealth into the future ideally without a loss of value

Unit of Account ndash serves as a way to measure and compare the value of goods and services in relation to one another It also allows people to keep accurate financial records

Measurement of Money Supply

Measurement of Money Supply-Malaysia

M1currency and demand deposits held by the private

sector

M2 = M1 +savings deposits + fixed deposits of all maturities + net issues of

NCD + repo transactions effected [ofto the private sector]

[by the commercial banks]

M3 = M2 + savings deposits + fixed deposits of all maturities + net issues of

NCD + repo transactions effected [ofto the private sector]

[by other banks]

Money supply (or Money Stock)ndash The amount of money in an economy that is easily available for use in payments It is not just coins and notes in circulation

First Discussion

Do the official measures of Money Stock (M1 M2 and M3) accurately reflect the quantity of money in the economy

When we state M2 = Currency + Demand Deposits + Savings Deposits + Fixed Deposits + NCD + REPO what does

this mean

Second Discussion

What is the concept of Money in Islam

Must money in an Islamic economy be in the form of gold

Is fiat money incompatible with Islamic principles

• MONETARY ECONOMICS
• Content
• From Barter to Money
• Various Forms of Money
• Monetary Payment Systems
• Functions of Money
• Measurement of Money Supply
• First Discussion
• Second Discussion

Various Forms of Money

The use of cattle inexchange can be tracedback as far as 9000-6000 BC

Cowrie shells beingused as money can betraced to China in 1200BC

An Okpoho manilla (orbracelet) was an early form of money in Nigeria

The Katanga Cross was an archaic form ofmoney from WestAfrica

Bronze and copper replicas of shells weremanufactured in China by the end of the Stone Age and the Lydians (modern Turkey) coined gold and silver around 560 BC

Other Forms of Money- Whalersquos teeth- Bread- Spices

On the Micronesian Island of Yap huge limestone rocks wereformed into coins1048710 Some of these coins were 9-12feet in diameter and weighed several tons

Monetary Payment Systems

Barter Economy

Commodity Money

Representative to Gold-backed money

Fiat Money and the Future

Commodity Money item which is useful in its intrinsic value as well as its monetary properties

Began with banks issuing paper receipts to depositors indicating that the receipt is redeemable for the precious goods being stored

Representative money made the practice of fractional reserve banking possible

Paper Currency

This money is not backed by reserves of another commodity

The money is given value by government fiat (Latin for ldquolet it be donerdquo) or decree

Functions of Money Medium of Exchange ndash acts as a go-between to make it easier

to buy and sell goods and services or pay debts Allows buyers and sellers to avoid the difficulties associated with barter exchanges

Store of Value ndash allows people to transfer the purchasing power of their present money income or wealth into the future ideally without a loss of value

Unit of Account ndash serves as a way to measure and compare the value of goods and services in relation to one another It also allows people to keep accurate financial records

Measurement of Money Supply

Measurement of Money Supply-Malaysia

M1currency and demand deposits held by the private

sector

M2 = M1 +savings deposits + fixed deposits of all maturities + net issues of

NCD + repo transactions effected [ofto the private sector]

[by the commercial banks]

M3 = M2 + savings deposits + fixed deposits of all maturities + net issues of

NCD + repo transactions effected [ofto the private sector]

[by other banks]

Money supply (or Money Stock)ndash The amount of money in an economy that is easily available for use in payments It is not just coins and notes in circulation

First Discussion

Do the official measures of Money Stock (M1 M2 and M3) accurately reflect the quantity of money in the economy

When we state M2 = Currency + Demand Deposits + Savings Deposits + Fixed Deposits + NCD + REPO what does

this mean

Second Discussion

What is the concept of Money in Islam

Must money in an Islamic economy be in the form of gold

Is fiat money incompatible with Islamic principles

• MONETARY ECONOMICS
• Content
• From Barter to Money
• Various Forms of Money
• Monetary Payment Systems
• Functions of Money
• Measurement of Money Supply
• First Discussion
• Second Discussion

Monetary Payment Systems

Barter Economy

Commodity Money

Representative to Gold-backed money

Fiat Money and the Future

Commodity Money item which is useful in its intrinsic value as well as its monetary properties

Began with banks issuing paper receipts to depositors indicating that the receipt is redeemable for the precious goods being stored

Representative money made the practice of fractional reserve banking possible

Paper Currency

This money is not backed by reserves of another commodity

The money is given value by government fiat (Latin for ldquolet it be donerdquo) or decree

Functions of Money Medium of Exchange ndash acts as a go-between to make it easier

to buy and sell goods and services or pay debts Allows buyers and sellers to avoid the difficulties associated with barter exchanges

Store of Value ndash allows people to transfer the purchasing power of their present money income or wealth into the future ideally without a loss of value

Unit of Account ndash serves as a way to measure and compare the value of goods and services in relation to one another It also allows people to keep accurate financial records

Measurement of Money Supply

Measurement of Money Supply-Malaysia

M1currency and demand deposits held by the private

sector

M2 = M1 +savings deposits + fixed deposits of all maturities + net issues of

NCD + repo transactions effected [ofto the private sector]

[by the commercial banks]

M3 = M2 + savings deposits + fixed deposits of all maturities + net issues of

NCD + repo transactions effected [ofto the private sector]

[by other banks]

Money supply (or Money Stock)ndash The amount of money in an economy that is easily available for use in payments It is not just coins and notes in circulation

First Discussion

Do the official measures of Money Stock (M1 M2 and M3) accurately reflect the quantity of money in the economy

When we state M2 = Currency + Demand Deposits + Savings Deposits + Fixed Deposits + NCD + REPO what does

this mean

Second Discussion

What is the concept of Money in Islam

Must money in an Islamic economy be in the form of gold

Is fiat money incompatible with Islamic principles

• MONETARY ECONOMICS
• Content
• From Barter to Money
• Various Forms of Money
• Monetary Payment Systems
• Functions of Money
• Measurement of Money Supply
• First Discussion
• Second Discussion

Functions of Money Medium of Exchange ndash acts as a go-between to make it easier

to buy and sell goods and services or pay debts Allows buyers and sellers to avoid the difficulties associated with barter exchanges

Store of Value ndash allows people to transfer the purchasing power of their present money income or wealth into the future ideally without a loss of value

Unit of Account ndash serves as a way to measure and compare the value of goods and services in relation to one another It also allows people to keep accurate financial records

Measurement of Money Supply

Measurement of Money Supply-Malaysia

M1currency and demand deposits held by the private

sector

M2 = M1 +savings deposits + fixed deposits of all maturities + net issues of

NCD + repo transactions effected [ofto the private sector]

[by the commercial banks]

M3 = M2 + savings deposits + fixed deposits of all maturities + net issues of

NCD + repo transactions effected [ofto the private sector]

[by other banks]

Money supply (or Money Stock)ndash The amount of money in an economy that is easily available for use in payments It is not just coins and notes in circulation

First Discussion

Do the official measures of Money Stock (M1 M2 and M3) accurately reflect the quantity of money in the economy

When we state M2 = Currency + Demand Deposits + Savings Deposits + Fixed Deposits + NCD + REPO what does

this mean

Second Discussion

What is the concept of Money in Islam

Must money in an Islamic economy be in the form of gold

Is fiat money incompatible with Islamic principles

• MONETARY ECONOMICS
• Content
• From Barter to Money
• Various Forms of Money
• Monetary Payment Systems
• Functions of Money
• Measurement of Money Supply
• First Discussion
• Second Discussion

Measurement of Money Supply

Measurement of Money Supply-Malaysia

M1currency and demand deposits held by the private

sector

M2 = M1 +savings deposits + fixed deposits of all maturities + net issues of

NCD + repo transactions effected [ofto the private sector]

[by the commercial banks]

M3 = M2 + savings deposits + fixed deposits of all maturities + net issues of

NCD + repo transactions effected [ofto the private sector]

[by other banks]

Money supply (or Money Stock)ndash The amount of money in an economy that is easily available for use in payments It is not just coins and notes in circulation

First Discussion

Do the official measures of Money Stock (M1 M2 and M3) accurately reflect the quantity of money in the economy

When we state M2 = Currency + Demand Deposits + Savings Deposits + Fixed Deposits + NCD + REPO what does

this mean

Second Discussion

What is the concept of Money in Islam

Must money in an Islamic economy be in the form of gold

Is fiat money incompatible with Islamic principles

• MONETARY ECONOMICS
• Content
• From Barter to Money
• Various Forms of Money
• Monetary Payment Systems
• Functions of Money
• Measurement of Money Supply
• First Discussion
• Second Discussion

First Discussion

Do the official measures of Money Stock (M1 M2 and M3) accurately reflect the quantity of money in the economy

When we state M2 = Currency + Demand Deposits + Savings Deposits + Fixed Deposits + NCD + REPO what does

this mean

Second Discussion

What is the concept of Money in Islam

Must money in an Islamic economy be in the form of gold

Is fiat money incompatible with Islamic principles

• MONETARY ECONOMICS
• Content
• From Barter to Money
• Various Forms of Money
• Monetary Payment Systems
• Functions of Money
• Measurement of Money Supply
• First Discussion
• Second Discussion

Second Discussion

What is the concept of Money in Islam

Must money in an Islamic economy be in the form of gold

Is fiat money incompatible with Islamic principles

• MONETARY ECONOMICS
• Content
• From Barter to Money
• Various Forms of Money
• Monetary Payment Systems
• Functions of Money
• Measurement of Money Supply
• First Discussion
• Second Discussion