Page 65 - Understanding Economics for Class 10

currency
 Paper notes and coins
are the modern forms of
money. Modern currency
Goyal Brothers Prakashan
is not made of precious
metal such as gold, silver
and copper as it used to
be earlier. It is also not for Gupta Coins
everyday use like grain
and cattle used to be in Early punch-marked coins
early ages. The modern (may be 2500 years old)
currency is without any
use of its own.
 Since it is authorised by the
government of the country, Gold Mohar from Modern Coin
therefore it can be used as Tughlaq Coin Akbar's reign
a medium of exchange. (Courtesy: NCERT)
 In India, currency notes are issued by Reserve Bank of India on behalf of the Central
Government. No other individual or organisation is allowed to do so as per Indian law.
 In settling transactions, nobody can refuse the use of money as a medium of payment. It is
legalized by law in India. No individual in India can legally refuse a payment made in rupees.
 As a result, the rupee enjoys broad acceptance as a medium of exchange.

deposits with Bank
 Deposits with banks is the other form in which people hold money.
 At a point of time, only some currency is needed for day-to-day needs.
 For example: Salary is generally given to the workers at the end of each month. So, they
have extra cash at the beginning of the month which they can deposit with bank by opening
a bank account in their name.
 Depositors earn interest on their deposits (paid by bank). By keeping money in bank,
people earn interest as well their money is kept safely with the bank.
 There is also a provision of withdrawal of money as and when it is required by the people.
 These deposits are called demand deposits as deposits in the bank accounts can be withdrawn
on demand.
 Demand deposits offers a special facility which lends it the essential characteristics of
money (that of a medium of exchange).
 Payment can be made through cheque instead of cash. A cheque is a paper instructing
the bank to pay a specific amount from the account of the issuer to the individual
whose name appears on the cheque.
 Payment through cheque can be made by issuing the cheque of a specific amount in
the name of the person to whom payment is to be made. For this, payer should have
an account with the bank.
Let’s take an example to see and understand how cheque payments are made and realized.
M. Salim, a shoe manufacturer, has to make a payment to the leather supplier and therefore issues
a cheque of a specific amount. This means that the bank is instructed by the shoe manufacturer
to pay this amount to the leather supplier. The leather supplier takes this cheque, and deposits
it in his own account in the bank. In a couple of days, money is transferred from one bank
account to another bank account. Without any payment of cash, the transaction is complete.
E-56 Economics Class X