Class 12 Economics – Money and Banking

Chapter Overview

This chapter examines money as a medium of exchange, store of value, unit of account, and standard for deferred payments. It explores the role of commercial banks in accepting deposits and credit creation, and studies the functions of the Reserve Bank of India (RBI), including control of money supply through CRR, repo rate, and open market operations. :contentReference[oaicite:0]{index=0}

Important Keywords

• Money: Anything generally accepted in exchange—medium, store, unit of account, deferred payment standard. :contentReference[oaicite:1]{index=1}
• Money Supply: Total currency+demand deposits (M1) expanded by M2, M3… :contentReference[oaicite:2]{index=2}
• High-Powered Money: Currency + RBI reserves—basis of credit creation. :contentReference[oaicite:3]{index=3}
• Money Multiplier: Ratio of total money to base money—driven by reserve/deposit ratios. :contentReference[oaicite:4]{index=4}
• Credit Creation: Commercial banks’ ability to lend multiple times of deposits. :contentReference[oaicite:5]{index=5}
• Central Bank: RBI—issues currency, lender of last resort, regulator. :contentReference[oaicite:6]{index=6}
• Monetary Policy: Tools like CRR, repo rate, open market operations, selective credit control. :contentReference[oaicite:7]{index=7}
• Near‑Money: Liquid assets not directly used as money (bonds, commercial papers). :contentReference[oaicite:8]{index=8}