Money serves as a medium of exchange, a unit of account, and a store of value, with usefulness depending on acceptance and purchasing-power conditions.

Barter requires a double coincidence of wants: each party must want what the other offers. Money reduces this matching problem by separating sale from purchase.

A financial asset and money are not identical categories. Liquidity describes how readily an asset can be used or converted for payment without major loss.

Banks accept deposits and provide loans and other financial services within the legal and regulatory framework. Interest paid on deposits and earned on lending are related but distinct flows.

Lending can create a deposit in the banking system, but banks face constraints including capital, liquidity, risk management, regulation, and demand for credit. They cannot create unlimited real resources.

A bank’s customer deposit is an asset for the depositor and a liability for the bank. Keeping the accounting viewpoint clear prevents confusion.

A central bank has monetary, currency, banking-system, and other statutory functions. In India, the Reserve Bank of India performs central-banking functions under the applicable laws.

Monetary policy and government fiscal policy are different. Monetary policy concerns monetary and financial conditions; fiscal policy concerns government revenue, expenditure, and borrowing.

Current policy rates change over time. Learn the meaning of a policy instrument separately from memorising its value on a particular date.