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MONEY

FUNCTIONS OF MONEY
Medium of Exchange
FUNCTIONS OF MONEY
Store of Value
FUNCTIONS OF MONEY
Unit of Account (Measurement)
FUNCTIONS OF MONEY
Standard of Deferred Payment (Means of Payment)
CHARACTERISTICS OF MONEY
Durability
Portable
Divisible
Hard to Counterfeit
Generally Accepted by the Population
Valuable
Scarce
MONEY AND PRICES

Purchasing power of money is the


amount of goods and services a unit
of money can buy
When money loses its purchasing
power, it loses its role as money
Purchasing Power of Money
Amount a currency will buy varies inversely
with the price level
CPI (Inflation), Value of Money

1
=

where P = index no.
Inflation and Acceptability

Runaway inflation may significantly


depreciate the value of money
between the time it is received and
the time it is spent
Inflation and Acceptability

Without acceptable medium of


exchange, the economy may simply
revert to trade
People will only use money as a store of
value as long as there is no sizable
deterioration in the value of money.
How do you stabilize the
value of money?

Appropriate Fiscal Policies


Regulation of the Money Supply
(Monetary Policies)
Demand for Money: Why does the
public want to hold some of its wealth?
Transaction Demand
To make purchases
Main determinant of the amount of
money demanded for transactions:
level of nominal GDP
Demand for Money: Why does the
public want to hold some of its wealth?
Transaction Demand
Households and firms will want
more money for transactions if
prices rises or if real output
increases
Demand for Money: Why does the
public want to hold some of its wealth?
Asset Demand
To hold money as an asset
Financial Assets
THE FINANCIAL
SYSTEM
Financial System

System that allows money to go between


savers and borrowers
Made of intricate and complex models that
portray financial services, institutions, and
markets that link depositors with investors
Financial Services
Types of Banks

Universal Banks
Commercial Banks
Specialized Government Banks
Thrift Banks
Small Private Banks
What is a Central Bank?

Monopolized and often nationalized institution


given privileged control over the production
and distribution of money and credit
Responsible for the formulation of monetary
policies and regulation of member banks
Functions of the Central Bank

Liquidity Management
Currency Issue
Lender of Last Resort
Financial Supervision
Management of Foreign Currency Reserves
BANGKO SENTRAL
NG PILIPINAS
The Three Pillars

1. Price Stability
Inflationary targeting
Promote economic efficiency and
improve well-being of the Filipinos
The Three Pillars

2. Financial Stability
Maintain the health of the banking
system so that it can effectively
intermediate between providers
and users
The Three Pillars

3. Efficient Payments & Settlement System


Ensure the safe, timely, and accurate
payment and settlement of financial
transactions
BSPs Organizational Structure
Monetary Stability Sector
mainly responsible for the
operations/activities related to
monetary policy formulation and
implementation
Supervision and Examination Sector
mainly responsible for the
regulation of banks and other
BSP-supervised financial
institutions
Resource Management Sector
mainly responsible for the
management of human,
financial, and physical resources
of the Bank
BSPs Organizational Structure
Security Plant Complex
responsible for the production
of Philippine currency, security
documents, and
commemorative medals and
medallions
Executive Management Services
a collective term for all
departments/offices directly
reporting to the Monetary
Board or to the Governor

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