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CPT Section C General  Economics Chapter 8 Unit 1  
CA Shweta Poojari 
Page 2


CPT Section C General  Economics Chapter 8 Unit 1  
CA Shweta Poojari 
1.Concept of Barter System 
2.Meaning & Definition of Money 
3. Functions of Money 
4. Classification of Money 
5. Money Supply & Money Stock in India 
6. Multiple Choice questions 
Page 3


CPT Section C General  Economics Chapter 8 Unit 1  
CA Shweta Poojari 
1.Concept of Barter System 
2.Meaning & Definition of Money 
3. Functions of Money 
4. Classification of Money 
5. Money Supply & Money Stock in India 
6. Multiple Choice questions 
Barter system refers to direct exchange of goods & 
Services i.e. Exchanging goods/services available with us 
to buy the goods/services we need, because there was no 
standard mode for settlement of transactions like “Money”. 
 
Eg: One person has surplus of wheat wants cloth and 
another person having surplus of cloth wants wheat. 
Page 4


CPT Section C General  Economics Chapter 8 Unit 1  
CA Shweta Poojari 
1.Concept of Barter System 
2.Meaning & Definition of Money 
3. Functions of Money 
4. Classification of Money 
5. Money Supply & Money Stock in India 
6. Multiple Choice questions 
Barter system refers to direct exchange of goods & 
Services i.e. Exchanging goods/services available with us 
to buy the goods/services we need, because there was no 
standard mode for settlement of transactions like “Money”. 
 
Eg: One person has surplus of wheat wants cloth and 
another person having surplus of cloth wants wheat. 
Lack of Double Coincidence 
Lack of Divisibility 
Lack of Measure of Value 
Page 5


CPT Section C General  Economics Chapter 8 Unit 1  
CA Shweta Poojari 
1.Concept of Barter System 
2.Meaning & Definition of Money 
3. Functions of Money 
4. Classification of Money 
5. Money Supply & Money Stock in India 
6. Multiple Choice questions 
Barter system refers to direct exchange of goods & 
Services i.e. Exchanging goods/services available with us 
to buy the goods/services we need, because there was no 
standard mode for settlement of transactions like “Money”. 
 
Eg: One person has surplus of wheat wants cloth and 
another person having surplus of cloth wants wheat. 
Lack of Double Coincidence 
Lack of Divisibility 
Lack of Measure of Value 
In Barter system person 
having a surplus of one 
commodity should be able 
to find another person who 
needs it and has something 
to offer in exchange.  
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FAQs on PPT : Money and Banking - Economics Class 12 - Commerce

1. What is the role of money in the banking system?
Ans. Money plays a crucial role in the banking system as it serves as a medium of exchange, unit of account, and store of value. It allows individuals and businesses to conduct transactions, measure the value of goods and services, and save for future use.
2. How do banks create money?
Ans. Banks create money through the process of fractional reserve banking. When a bank receives a deposit, it keeps a fraction of it as reserves and lends out the rest. This lending creates new money in the form of bank deposits, which can then be used for spending and economic activities.
3. What is the difference between commercial banks and central banks?
Ans. Commercial banks are privately owned financial institutions that provide a range of services to individuals and businesses, such as accepting deposits, granting loans, and facilitating payments. Central banks, on the other hand, are government-owned or controlled institutions that oversee the monetary system, regulate commercial banks, and conduct monetary policy to stabilize the economy.
4. How does the Federal Reserve control the money supply?
Ans. The Federal Reserve controls the money supply through various tools of monetary policy. It can influence the money supply by adjusting the reserve requirements for banks, conducting open market operations to buy or sell government securities, and changing the discount rate at which banks can borrow from the central bank.
5. What is the role of interest rates in the banking system?
Ans. Interest rates play a significant role in the banking system as they determine the cost of borrowing and the return on savings. Banks set their lending rates based on various factors, including the central bank's policy rates, market conditions, and the creditworthiness of borrowers. Higher interest rates can encourage saving and reduce borrowing, while lower rates can stimulate borrowing and economic growth.
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