Lecture03_Money (part 1 of this lecture)

[K@sh Again]

1st of all we have to learn about a very important term that is money.

what is money? Commonly we used to say that this man has a lot of money Or this man is making a lot of money, what does it means?? it means that his income level is much higher, for example a CA's salary is much higher than a factory labor, It means Chartered Accountant is making money higher than factory labor. making money means earning money OK. In this sense we can take money as an asset, so we can call money as our asset. OK,

we can classify money as an asset but this is an asset which use to making payments of goods and services as well as settling down our debt obligations.

Well when we are talking about a wealthy individual then we often say that he has a lot of money, in this sense money is a stock variable.

Formally, if we want to define money then we can say:

Money is an asset which is generally accepted as payment for goods and services or repayment of debt. When we are taking money in this sense then money is not income or wealth, because function we are assigning here to the money that function is related to the payment of good & services and repayment of the loan.

So money is a function that is held in a readily spendable form, that immediately we can use money to complete any type of our transaction. Exactly speaking if we want to say that what basically is the money? Then we can say our money is an asset which is available in readily spendable form.

Currency, notes and coins are included in money and also included our wealth or asset in banks which is immediately available for making the payments. Here we can say, chequeing  account balances, except that any other asset which can be easily converted into cash and we can make payment by using that is classified as our money.

 

So how many components of money???

There are three components of money:

1.       Coin & currency

2.       Bank balances

3.       Any asset which can be converted easily into cash.

Money is not the same as income or wealth.

We should explain this thing a little bit more. In Economics, we read about to terminologies flow variable and stock variable.

Flow variable is the variable which is changing over a period of time.

Stock variable is a variable which is not changed in a certain period & we can measure its certain value over period, we can say it is the worth of it.  

 Note: You may see this concept of money in your handouts of MGT411, page number 8, lecture 03. now you may read the text under heading "Money" and after reading my full mail and reading that paragraph, if you will have still some questions in your mind about this topic then don't be shy to ask questions to me, I am here to explain you again and again.