(i) Increase in indirect tax like excise duty, customs duty, sales tax may lead to rise in price called taxflation.
(ii) Currency inflation: The excess supply of money in circulation causes rise in price level.

(i) In India, currency notes are issued by RBI and coins by the Ministry of Finance, Government of India.
(ii) Besides these, the savings or current account deposits held by the public in commercial banks is also considered money.
(iii) Currency notes are also called fiat money and legal tenders.

(i) Money is anything that is generally accepted as a medium of exchange.
(ii) Money must be able to act as a medium of exchange, a store of value, and a unit of account. For money to act as a medium of exchange, sellers must generally accept and buyers must generally use it to pay for goods and services.
(iii) For money to serve as a store of value, it can be used to transport purchasing power from one period of time to another.
(iv) For money to serve as a unit of account, it must function as a consistent way of quoting prices.
(v) The primary function of money is to serve as a medium of exchange.

When the inflation is very moderate, it acts as an incentive to traders and producers. The profit due to rising prices encourages and induces business class to increase their investments in production, leading to generation of employment and income.
(i) However, hyper-inflation results in a serious depreciation of the value of money and it discourages savings.
(ii) When the value of money undergoes considerable depreciation, this may even drain out the foreign capital.
(iii) With reduced capital accumulation, the investment will suffer a serious set-back which may have an adverse effect on the volume of production.

(i) Increase in Money Supply: Inflation is caused by an increase in the supply of money which leads to increase in aggregate demand.
(ii) Increase in Disposable Income: When the disposable income of the people increases, it raises their demand for goods and services.
(iii) Increase in Public Expenditure: Government activities have been expanding due to developmental activities and social welfare programmes.

n = pk (or) p = n / k
Where
n is the total supply of money
p is the general price level of consumption goods
k is the total quantity of consumption units the people decide to keep in the form of cash.
because it is measured in terms of consumer goods.
According to Keynes, peoples desire to hold money is unaltered by monetary authority. So, price level and value of money can be stabilized through regulating quantity of money (n) by the monetary authority.
Later, Keynes extended his equation in the following form:
n = p (k + rk') or p = n/(k + rk')
Where,
n = total money supply
p = price level of consumer goods
k = peoples' desire to hold money in hand (in terms of consumer goods) in the total income of them
r = cash reserve ratio
k' = community’s total money deposit in banks, in terms of consumers goods.

(i) Basis of the Credit System: Money is the basis of the Credit System. Business transactions are either in cash or on credit.
(ii) Money facilitates distribution of National Income: The task of distribution of national income was exceedingly complex under the barter system.
(iii) Money helps to Equalize Marginal Utilities and Marginal Productivities: Consumer can obtain maximum utility only if he incurs expenditure on various commodities in such a manner as to equalize marginal utilities accruing from them.
(iv) Money Increases Productivity of Capital: Money is the most liquid form of capital. In other words, capital in the form of money can be put to any use.

(i) Money as a Store of value: Savings done in terms of commodities were not permanent. But, with the invention of money, this difficulty has now disappeared and savings are now done in terms of money.
(ii) Money as a Standard of Deferred Payments: Borrowing and lending were difficult problems under the barter system. In the absence of money, the borrowed amount could be returned only in terms of goods and services.
(iii) Money as a Means of Transferring Purchasing Power: The field of exchange also went on extending with growing economic development. The exchange of goods is now extended to distant lands.

(i) Money as a medium of exchange: This is considered as the basic function of money. Money has the quality of general acceptability, and all exchanges take place in terms of money.
(ii) Money as a measure of value: The second important function of money is that it measures the value of goods and services.

(i) The latest type of money is plastic money.
(ii) Plastic money is one of the most evolved forms of financial products. Plastic money is an alternative to the cash or the standard “money”.
(iii) Plastic money is a term that is used predominantly in reference to the hard plastic cards used every day in place of actual bank notes.
(iv) Plastic money can come in many different forms such as Cash cards, Credit cards, Debit cards, Pre-paid Cash cards, Store cards, Forex cards and Smart cards. They aim at removing the need for carrying cash to make transactions.

(i) The paper currency standard reffers to the monetary system in which the paper currency notes issued by the treasury of the Central Bank.
(ii) Paper currency is not convertible into any metal.
(iii) Its value is determined independent of the value of gold or any other commodity.
(iv) It also known as managed currency standard.

Barter System:
(i) Goods exchange for goods is known as Barter System.
(ii) In olden days goods were exchanged for goods and not for cash.
(iii) Barter system was introduced by Mesopotamia tribes.
(iv) Babylonian's also developed an improved barter system, where goods were exchanged for goods.

M₁ = Currency, Coins and demand deposits.
M₂ = M₁ + Saving deposits with post office savings banks.
M₃ M₂ + Time deposits of all commercial and cooperative banks.
M₄ = M₃ + Total deposits with post offices.
M₁ and M₂ are known as narrow money.
M₃ and M₄ are known as broad money.
The graduations are in decreasing order of liquidity.