Classification of money
Money has been classified by different economists. Important classifications of money are explained below:-
1) MONEY PROPER AND MONEY ACCOUNT- Money Proper or Actual Money is the money which is in circulation in a country. It is the medium of exchange and means of payment. In India, for eg. The rupee note and the rupee coin are the actual money.
Money of Account is that in which account are maintained. Prices of goods and services, general purchasing power, debts, etc., are all expressed in terms of money of account.
2) COMMODITY MONEY AND REPRESENTATIVE MONEY:- Commodity Money is made of certain metal and it's face value is equal to its intrinsic value. It is also called full-bodied money.
The Money Proper in circulation which is not full-bodied is called Representative Money. It is a money whose value is materially greater than the value of the stuff of which it is composed . Paper currency notes are an example.
3) LEGAL TENDER AND OPTIONAL MONEY:- Legal Tender money is enforced by law. No one can refuse to accept it as a means of payment. It may be of 2 types:- LIMITED LEGAL TENDER and UNLIMITED LEGAL TENDER.
Limited Legal Tender money is accepted as legal tender only up-to a certain limit. For e.g. in India, the small coins of 1,2,5,10 and 25 praise are legal tender only up-to a sum of Rs. 25.
Unlimited Legal Tender is that money which has to be accepted as a medium of payment up-to any amount. For eg. In India, 50 paise coins, 1 rupee coin and currency notes of all domination are unlimited legal tender.
Optional Money is that money which may or may not be accepted as a means of payment, it has no legal sanction. Different credit instruments like cheques, bank drafts etc. Are the examples of optional money. No one can be forced to accept them.
4) METALLIC MONEY:- The money made of metal is called Metallic Money. It refers to coins made of certain metals like gold, silver, copper, nickel etc. Metallic money is of two types:- STANDARD OR FULL-BODIED MONEY AND TOKEN MONEY.
Any money whose face value is equal to its intrinsic value is called standard or full-bodied money.
The money whose face value is more than its intrinsic value is called token money. They are generally made of cheaper metals like, copper, nickel etc. And mostly represent lower denominations.
5) PAPER MONEY:- The money made of paper is called paper money. It consists of currency notes issued by the govt. Or the central bank of a country. In India, ONE RUPEE notes are issued by the MINISTRY OF FINANCE of the GOVERNMENT OF INDIA, and all other currency notes of higher denominations are issued by the R. B. I. Paper money is of 4 types:- REPRESENTATIVE PAPER MONEY, CONVERTIBLE PAPER MONEY, INCONVERTIBLE PAPER MONEY, and FIAT MONEY,.
Representative paper money is fully backed by gold and silver reserves.
Convertible paper money is convertible into standard coins or valuable metals.
Inconvertible paper money is not convertible into standard coins or valuable metals.
Fiat money is only a variety of INCONVERTIBLE paper money . The monetary authority gives no guarantee to convert Fiat money into valuable metals.
6) CREDIT MONEY:-- In modern economies, with the development of banking Activity, credit money is being widely used. Demand deposits of banks, which are withdrawable through cheques, serve as money and the cheques are accepted as a means of payment. It is to be noted that a cheque by itself is not money; it is only a credit instrument which performs the functions of money.
1) MONEY PROPER AND MONEY ACCOUNT- Money Proper or Actual Money is the money which is in circulation in a country. It is the medium of exchange and means of payment. In India, for eg. The rupee note and the rupee coin are the actual money.
Money of Account is that in which account are maintained. Prices of goods and services, general purchasing power, debts, etc., are all expressed in terms of money of account.
2) COMMODITY MONEY AND REPRESENTATIVE MONEY:- Commodity Money is made of certain metal and it's face value is equal to its intrinsic value. It is also called full-bodied money.
The Money Proper in circulation which is not full-bodied is called Representative Money. It is a money whose value is materially greater than the value of the stuff of which it is composed . Paper currency notes are an example.
3) LEGAL TENDER AND OPTIONAL MONEY:- Legal Tender money is enforced by law. No one can refuse to accept it as a means of payment. It may be of 2 types:- LIMITED LEGAL TENDER and UNLIMITED LEGAL TENDER.
Limited Legal Tender money is accepted as legal tender only up-to a certain limit. For e.g. in India, the small coins of 1,2,5,10 and 25 praise are legal tender only up-to a sum of Rs. 25.
Unlimited Legal Tender is that money which has to be accepted as a medium of payment up-to any amount. For eg. In India, 50 paise coins, 1 rupee coin and currency notes of all domination are unlimited legal tender.
Optional Money is that money which may or may not be accepted as a means of payment, it has no legal sanction. Different credit instruments like cheques, bank drafts etc. Are the examples of optional money. No one can be forced to accept them.
4) METALLIC MONEY:- The money made of metal is called Metallic Money. It refers to coins made of certain metals like gold, silver, copper, nickel etc. Metallic money is of two types:- STANDARD OR FULL-BODIED MONEY AND TOKEN MONEY.
Any money whose face value is equal to its intrinsic value is called standard or full-bodied money.
The money whose face value is more than its intrinsic value is called token money. They are generally made of cheaper metals like, copper, nickel etc. And mostly represent lower denominations.
5) PAPER MONEY:- The money made of paper is called paper money. It consists of currency notes issued by the govt. Or the central bank of a country. In India, ONE RUPEE notes are issued by the MINISTRY OF FINANCE of the GOVERNMENT OF INDIA, and all other currency notes of higher denominations are issued by the R. B. I. Paper money is of 4 types:- REPRESENTATIVE PAPER MONEY, CONVERTIBLE PAPER MONEY, INCONVERTIBLE PAPER MONEY, and FIAT MONEY,.
Representative paper money is fully backed by gold and silver reserves.
Convertible paper money is convertible into standard coins or valuable metals.
Inconvertible paper money is not convertible into standard coins or valuable metals.
Fiat money is only a variety of INCONVERTIBLE paper money . The monetary authority gives no guarantee to convert Fiat money into valuable metals.
6) CREDIT MONEY:-- In modern economies, with the development of banking Activity, credit money is being widely used. Demand deposits of banks, which are withdrawable through cheques, serve as money and the cheques are accepted as a means of payment. It is to be noted that a cheque by itself is not money; it is only a credit instrument which performs the functions of money.
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