Understanding the concept of money and banking from "summary" of Oswaal NCERT One For All for UPSC & State PSC's Indian Economy Classes-9 to 12 (Old & New NCERT Edition) (For 2023 Exam) by Oswaal Editorial Board
Money and banking are two fundamental components of any economy. Money serves as a medium of exchange, unit of account, and store of value. It facilitates transactions by eliminating the need for barter. Understanding the concept of money is crucial for comprehending how economies function. It can be in the form of coins, paper currency, or digital currency. Banks play a vital role in the financial system by accepting deposits, providing loans, and facilitating payments. They act as intermediaries between savers and borrowers. Banks create money through the process of credit creation, where they lend out a portion of the deposits they receive. This leads to an increase in the money supply in the economy. Central banks, such as the Reserve Bank of India, regulate the banking system and control the money supply. They implement monetary policy to achieve macroeconomic objectives like price stability and full employment. Central banks also act as lenders of last resort to maintain financial stability. Understanding the functions and roles of banks is essential for grasping how monetary policy influences economic activity. Banks help in mobilizing savings, allocating resources efficiently, and promoting economic growth. They also provide various financial services like investment banking, insurance, and wealth management.- Money and banking are integral to the functioning of modern economies. They facilitate economic transactions, drive growth, and ensure financial stability. Having a clear understanding of these concepts is essential for policymakers, economists, and individuals to make informed decisions and navigate the complexities of the financial system.
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