Banking. The essence and functions of money. Money supply. Monetary aggregates (most important)

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Banking. The essence and functions of money. Money supply. Monetary aggregates (most important)

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Topic 74. Essence and functions of money. Money supply. Monetary Aggregates

Essence of money lies in the fact that it is a specific commodity type, with the natural form of which the social function of a universal equivalent merges. The essence of money is expressed in the unity of three properties: - universal direct exchangeability; - crystallization of exchange value; - materialization of universal working time (Money Credit Banks lecture notes, Finance and credit, Economic theory lecture notes, History of economics textbook).

Money functions:

1) As measures of value. Money as a universal equivalent measures the value of all goods.

2) As means of circulation. Commodity circulation involves two changes in the forms of value: the sale of one product and the purchase of another. In this process, money plays the role of an intermediary in the exchange of two goods: commodity-money-commodity (T-M-T).

3) As a means of creating treasures, accumulations and savings.

4) As a means of payment - arose in connection with the development of credit relations in the capitalist economy. In this function, money is used to sell goods on credit and to pay wages to workers and employees.

5) World money. World money serves as: a universal means of payment, a universal means of purchase, the materialization of social wealth. The most important quantitative indicator of money circulation is money supply - the total volume of purchasing and payment means serving economic turnover and belonging to individuals, enterprises and the state. To analyze quantitative changes in money circulation on a certain date and for a certain period, as well as to develop measures to regulate the growth rate and volume of the money supply, various indicators are used (monetary aggregates): М1 = cash in circulation (banknotes, coins) and funds in current bank accounts; M2 = M1 + term and savings deposits in commercial banks (up to 4 years); M3 = M2 + savings deposits in specialized credit institutions; M4 = M3 + certificates of deposit of large commercial banks.

The following aggregates are used to calculate the total money supply in the Russian Federation: M0 = cash; M1 \u0d MXNUMX + settlement, current and other accounts (settlement, special accounts, capital investment accounts, letters of credit and checking accounts, budget, trade union accounts) + deposits in commercial banks + demand deposits in Sberbank; M2 = M1 + term deposits in Sberbank; M3 = M2 + certificates of deposit and government bonds. A balance is necessary between the aggregates, otherwise there is a violation of monetary circulation. Practice shows that equilibrium occurs when M2 > M1 and it is strengthened when M2 + M3 > M1.

2 factors influence the money supply:

1) The amount of money supply is determined by the state - the issuer of money. 2) The rate of turnover of money - the intensity of the movement of money when they perform the functions of circulation and payment. The velocity of money circulation is influenced by general economic factors, i.e., the cyclical development of production, its growth rate, price movements, as well as monetary factors, i.e. the structure of payment turnover (the ratio of cash and non-cash money), the development of credit operations, the level of interest rates , the use of electronic money in settlements.

Authors: Shevchuk D.A., Shevchuk V.A.

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