preface About money and credit
Answers
Money and credit are an important aspect of any economy.
Money refers to the wealth an economy has.
Credit however refers to the loans or money which is given and is to be repaid.
So money is considered as an asset.
However credits are considered as liabilities as they have to be repaid.
Money is a medium by which we can purchase goods and services. Originally, firstly coins came into practice. The coins were initially produced from valuable elements; like gold and silver. Paper notes gradually took place of coins although coins of fewer values are still in practice.
The currency banknotes and coins are dispensed by the government of a sanctioned body. In India, the RBI (Reserve Bank of India) circulates currency notes. On the Indian currency note, you can find a description which guarantees to pay the beneficiary the value which is specified on the currency note.
Credit: Banks keep a little proportion of the collateral as cash with themselves. This is normally 15% of their deposits as security. This value is kept as a prerequisite to return the account bearers who may proceed to withdraw the money from financial institutions. The rest of the amount is utilized by the banks to give capital to the people who need the credit. A bank imposes interest on the loan which it gives to its lenders. The percentage rate charged by a bank no loans is greater than the interest rate provided by it on deposits. Thus, interest is the principal source of revenue for banks.