Money and Banking Money and banking are fundamental pillars of a modern economy, facilitating transactions, promoting financial stability, and enabling economic growth. Money, as a medium of exchange, acts as a common denominator for valuing goods and services, simplifying transactions and eliminating the need for barter. Banking institutions, on the other hand, play a crucial role in the creation, allocation, and regulation of money supply. The Function of Money Money serves several essential functions in the economy: Medium of Exchange: Money eliminates the inefficiencies of barter by providing a standardized unit of value that facilitates transactions. Unit of Account: Money serves as a common measure of value, allowing for comparison and pricing of goods and services. store of Value: Money retains its value over time, enabling individuals and businesses to save and defer spending until needed. Standard of Deferred Payment: Money allows for contracts and agreements to be specified in terms of monetary values, facilitating transactions over time. The Role of Banking Institutions Banking institutions play a pivotal role in the financial system: Money Creation: Banks create money through fractional reserve banking, where they lend out a portion of deposits, expanding the money supply. Financial Intermediation: Banks act as intermediaries between depositors and borrowers, channeling funds from savers to borrowers who can utilize them for investment and growth. Payment System: Banks facilitate payments through various mechanisms, such as checks, electronic transfers, and credit cards, enabling smooth and efficient transactions. Financial Regulation: Central banks, as the primary regulators of the banking system, ensure financial stability by controlling the money supply, managing interest rates, and maintaining oversight of bank activities. Financial Innovation: Banks continuously innovate to develop new financial products and services, catering to the evolving needs of individuals and businesses. The Impact of Money and Banking Money and banking have a profound impact on the economy: Economic Growth: By facilitating transactions, promoting investment, and enabling savings, money and banking contribute to economic growth. Price Stability: Central banks manage the money supply to maintain price stability, preventing inflation and deflation, which can disrupt economic activity. Financial Inclusion: Expanding access to financial services, through innovative products and outreach programs, promotes financial inclusion, empowering individuals and businesses. Financial Stability: Sound banking regulations and responsible lending practices contribute to financial stability, reducing the risk of financial crises that can have severe economic consequences. Economic Resilience: A robust financial system enhances economic resilience, enabling the economy to adapt to shocks and recover from downturns.
00:00Hello viewers, welcome to the YouTube channel Roshni Vidhina.
00:05Today I will discuss the topic Money and Banking.
00:10Money and banking are fundamental pillars of a modern economy, facilitating transactions,
00:19promoting financial stability, and enabling economic growth.
00:24Money as a medium of exchange acts as a common denominator for valuing goods and services,
00:33simplifying transactions and eliminating the need for barter.
00:40Banking institutions, on the other hand, play a crucial role in the creation, allocation,
00:48and regulation of money supply.
00:52Function of Money
00:55Money serves several essential functions in the economy.
00:59Medium of Exchange
01:02Money eliminates the inefficiencies of barter by providing a standardized unit of value that facilitates transactions.
01:12Unit of Account
01:14Money serves as a common measure of value, allowing for comparison and pricing of goods and services.
01:22Store of Value
01:24Money retrains its value over time, enabling individuals and businesses to save and defer spending until needed.
01:35Standard of Deferred Payment
01:38Money allows for contracts and agreements to be specified in terms of monetary values, facilitating transactions over time.
01:50The Role of Banking Institutions
01:53Banking institutions play a pivotal role in the financial system.
01:59Money Creation
02:01Banks create money through fractional reserve banking where they lend out a portion of deposits, expanding the money supply.
02:11Financial Intermediation
02:14Banks act as intermediaries between depositors and borrowers, channeling funds from savers to borrowers who can utilize them for investment and growth.
02:29Payment System
02:31Banks facilitate payments through various mechanisms such as tax, electronics transfers, and credit cards, enabling smooth and efficient transactions.
02:45Financial Regulation
02:48Central banks, as the primary regulators of the banking system, ensure financial stability by controlling the money supply, managing interest rates, and maintaining oversight of bank activities.
03:05Financial Innovation
03:07Banks continuously innovate to develop new financial products and services, catering to the evolving needs of individuals and businesses.
03:19The Impact of Money and Banking
03:24Money and banking have a profound impact on the economy, economic growth.
03:30By facilitating transactions, promoting investment, and enabling savings, money and banking contribute to economic growth.
03:40Price Stability
03:42Central banks manage the money supply to maintain price stability, preventing inflation and deflation which can disrupt economic activity.
03:55Financial Inclusion
03:57Expanding access to financial services through innovative products and outreach programs promotes financial inclusion, empowering individuals and businesses.
04:11Financial Stability
04:13Sound banking regulations and responsible lending practices contribute to financial stability, reducing the risk of financial crises that can have severe economic consequences.
04:30Economic Resilience
04:33A reversed financial system enhances economic resilience, enabling the economy to adapt to shocks and recover from downturns.