Definition of Money

Definition of Money
Money is any object that is generally accepted as payment for goods and
services and repayment of debts in a given country.
History of Money
The history of money spans thousands of years. Numismatics is the scientific

study of money and its history in all its varied forms.
Many items have been used as commodity money such as naturally scarce
precious metals, cowry shells, barley, beads etc., as well as many other things
that are thought of as having value.
Modern money (and most ancient money) is essentially a token — in other
words, an abstraction. Paper currency is perhaps the most common type of
physical money today. However, objects of gold or silver present many of
money's essential properties.
The use of barter-like methods may date back to at least 100,000 years ago,
though there is no evidence of a society or economy that relied primarily on
barter.
Many cultures around the world eventually developed the use of commodity
money. The shekel was originally a unit of weight, and referred to a specific
weight of barley, which was used as currency.
The system of commodity money eventually evolved into a system of
representative money.
This occurred because gold and silver merchants or banks would issue receipts
to their depositors – redeemable for the commodity money deposited. Eventually,
these receipts became generally accepted as a means of payment and were
used as money. Paper money or banknotes were first used in China. Banknotes
were first issued in Europe by Stockholms Banco in 1661, and were again also
used alongside coins. The gold standard, a monetary system where the medium
of exchange are paper notes that are convertible into pre-set, fixed quantities of
gold, replaced the use of gold coins as currency in the 17th-19th centuries in
Europe. These gold standard notes were made legal tender, and redemption into
gold coins was discouraged. By the beginning of the 20th century almost all
countries had adopted the gold standard, backing their legal tender notes with
fixed amounts of gold. After World War II, most countries adopted fiat currencies
that were fixed to the US dollar. The US dollar was in turn fixed to gold. In 1971
the US government suspended the convertibility of the US dollar to gold.
Origin of Money
In the past, "Money is a matter of functions four, a medium, a measure, a

standard, a store." That is, money functions as a medium of exchange, a unit of
account, a standard of deferred payment, and a store of value. However, most
modern textbooks now list only three functions, that of medium of exchange, unit
of account, and store of value, not considering a standard of deferred payment
as a distinguished function, but rather subsuming it in the others.
The main functions of money are distinguished as: a medium of exchange; a unit
of account; a store of value; and, a standard of deferred payment.
Money originated as commodity money, but nearly all contemporary money
systems are based on fiat money. Fiat money is without intrinsic use value as a
physical commodity, and derives its value by being declared by a government to
be legal tender; that is, it must be accepted as a form of payment within the
boundaries of the country, for "all debts, public and private".
The money supply of a country consists of currency (banknotes and coins) and
demand deposits or 'bank money' (the balance held in checking accounts and
savings accounts). These demand deposits usually account for a much larger
part of the money supply than currency. Bank money is intangible and exists only
in the form of various bank records. Despite being intangible, bank money still
performs the basic functions of money, being generally accepted as a form of
payment.
Types of money
Currently, most modern monetary systems are based on fiat money. However,
for most of history, almost all money was commodity money, such as gold and
silver coins. As economies developed, commodity money was eventually
replaced by representative money, such as the gold standard, as traders found
the physical transportation of gold and silver burdensome. Fiat currencies
gradually took over in the last hundred years, especially since the breakup of the
Bretton Woods system in the early 1970s.
1. Commodity Money:
Many items have been used as commodity money such as naturally scarce
precious metals, conch shells, barley, beads etc . The commodity itself
constitutes the money, and the money is the commodity. Examples of
commodities that have been used as mediums of exchange include gold, silver,
copper, rice, salt, peppercorns, large stones, decorated belts, shells, alcohol,
cigarettes, cannabis, candy, etc.
2. Metallic Money:
Metallic money in some form was used at a very remote time in the world's
history. It appears that at first the baser metals, like iron, tin and bronze, were
used. Copper has been used as money in all ages. The early Hebrews used
copper coins chiefly, and the Coins were made of copper until displaced by
silver. Because of its low and fluctuating value, however, it is unfitted for money,
except in coins of small denominations.
Full bodied Money: (Face value and internal value is same)
Token Money: (Internal value less then face value)
3. Paper Money:
Legal documents such as banknotes, checks, drafts and other bills of exchange,
postal orders, promissory notes, etc., that represents money in a more or less
liquid form.
• Representative money
Representative money can be reliably exchanged for a fixed quantity of a

commodity such as gold or silver. The value of representative money stands in
direct and fixed relation to the commodity that backs it, while not itself being
composed of that commodity.
Representative money refers to money that consists of a token or certificate that
can be exchanged for a fixed quantity of a commodity such as gold, silver or
potentially water, oil or food.
• Convertible money
Convert One Currency to Another with Our Quick & Easy Exchange Tool.
That can be easily and freely exchanged for other currencies. Also called hard
currency.
• Fiat money
Money which has no intrinsic value and cannot be redeemed for specie or any
commodity, but is made legal tender through government decree. All modern
paper currencies are fiat money, as are most modern coins. The value of fiat
money depends on the strength of the issuing country's economy. Inflation
results when a government issues too much fiat money.
4. Bank Money:
Bank money is mean near money, which is not always legal tender but it is
widely use as a medium of exchange.
Bank money originated in two forms: Drafts, which are receipts for value, held on
account, and "bills", which were issued with a promise to convert at a later date.
• Cheque:
Cheque is a piece of paper that orders a payment of money.
• Bill of exchange:
An unconditional order issued by a person or business which directs the recipient
to pay a fixed sum of money to a third party at a future date. The future date may
be either fixed or negotiable. A bill of exchange must be in writing and signed and
dated.
• Draft:
A check drawn by one bank against funds deposited into its account at another
bank, authorizing the second bank to make payment to the individual named in
the draft.
5. Plastic Money:
Plastic money is the alternative to the cash or the standard 'money'. Plastic
money is used to refer to the credit cards that we use to make purchases in our
everyday life. Plastic money is much more convenient to carry around as you do
not have to carry a huge some of money with you. It is also much safer to carry it
along or to travel with it as if it is stolen one can consult the bank whose service
you are using and get it blocked hence saving your money from getting stolen or
even lost.

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Definition of Money

The history of money spans thousands of years. Numismatics is the scientific

In the past, "Money is a matter of functions four, a medium, a measure, a

Full bodied Money: (Face value and internal value is same)

Token Money: (Internal value less then face value)

Representative money can be reliably exchanged for a fixed quantity of a

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