GSEB Class 12 Economics Notes Chapter 3 Money and Inflation

This GSEB Class 12 Economics Notes Chapter 3 Money and Inflation covers all the important topics and concepts as mentioned in the chapter.

Money and Inflation Class 12 GSEB Notes

Meaning of Barter System:
Barter system is a system of exchanging goods or services for other goods or services without using a medium of exchange, such as money. For example, a farmer cultivating wheat would exchange wheat to get rice or clothes, teachers used to get food in exchange for knowledge.

Limitations of Barter System:

  • Issue of mutual adjustment of wants
  • Difficulty in storing value
  • Problem of measuring value and
  • Lack of common standard of measurement of value.

Origin and Development of concept of Money:

  • Initially there was universally acceptable medium of exchange in barter system.
  • In agricultural economy the animals like cow, buffalo and horse became the means of exchange values for money and trade.
  • Animals are mortal, they get sick and die therefore storage of wealth in the form of animals was not advisable. Hence, valuable minerals – coins were used instead of animals.
  • At the onset of imperialism the use of coin started as a medium of exchange of goods and services in the kingdom.
  • Democracy and industrialization inspired the need for the modern money as a means of exchange and the money became widely accepted as a means of exchange. The advent of banking system made it easier to transfer and storage of money.

GSEB Class 12 Economics Notes Chapter 3 Money and Inflation

Meaning and Functions of Money:
Meaning of Money:
Money is that which performs the functions of money as a medium of exchange.

Definitions of Money:

  • Marshall: Money is that medium which is used as a means of exchange without any doubt or investigation regardless of time or place.
  • Robertson: What is accepted universally in exchange of goods or services.

Functions of Money:

  • As a medium of exchange,
  • As a store value
  • As a measure of value and
  • As a standard of defferred payment.

Types of Money:

  • Commodity money,
  • Animals money
  • Metal money
  • Paper money
  • Bank money and
  • Plastic money (Credit card, Debit card).

Meaning and Definition of Inflation:
Meaning of Inflation:
In a simple sense, inflation means a rise in the general price level. It is a monetary event and economic problem.

Definition of Inflation:

  • Dr A. E Lemer: A situation of excess demand over supply of goods is called inflation.
  • Dr A. C. Pigou: Inflation is said to occur when monetary income rises faster than real income.
  • Dr J. M. Keynes: The real situation of inflation is created with increase in money/income beyond the level of the full employment of factors of production.

Characteristics of Inflation:

  • Constant rise in price level,
  • Price rise in all sectors of economy,
  • Purchasing power of money decreases,
  • The rise in price level after full employment and
  • Keeping control over increase in price level by rules or law, it is considered inflation.

GSEB Class 12 Economics Notes Chapter 3 Money and Inflation

Causes of Inflation:

  1. Increase in demand
    • Increase in supply of Money,
    • Increase in public expenditure
    • Over-population.
  2. Increase in cost of production.
  3. Other reasons
    • Taxation policy
    • Increase in price of import
    • Scarcity.

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