The Different Types Of Money

Types Of Money: Money is anything that is widely accepted in exchange for goods and services. Money is a medium of exchange and a store of value. This may consist of physical objects, that as notes and coins; or of book or computer entries, that is bank deposits. Money was originally a physical substance such as gold or silver, which was valued for its own sake before it comes to be used as coinage. Coins and notes are now usually tokens, whose intrinsic value is below their face value.

Read: Importance of Money In The Modern Economy

1. Commodity Money

Commodity money is the type of money that is in the form of a commodity with intrinsic value which means it has value outside of its use as money. The commodity itself represents money, and money is the commodity. Examples: Gold, Silver, Copper, salt, peppercorn rice, large stones, etc.

2. Representative Money

It actually represents Money. It is exchangeable for commodities. Example: Token coins, or any physical tokens like certificates.

3. Fiat Money

It is whose value is not derived from any intrinsic value or any guarantee that it can be converted into a valuable commodity (like gold). It has value as money because a government decreed that it has value for that purpose.

4. Commercial Bank Money

Commercial bank cash may be represented as claims against monetary establishments which will be wont to purchase merchandise or services. It represents the portion of a currency that’s a product of debt generated by business banks. a lot of specifically, bank cash is formed through what we have a tendency to decide halfway reserve banking.

Halfway reserve banking describes a method wherever business banks offer out loans prices quite the worth of the particular currency they hold. At this time simply note that in essence, bank cash is debt generated by business banks that will be changed for “real” cash or to shop for merchandise and services.

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