Plastic money is also called e-money.why?
Answers
(1) Full Bodied Money:
Definition:
The money whose face value is equal to its real value is called full bodied money. All the moneys which were used under commodity standard like wool, boat, sheep, cow, goat and arrows etc., had equal monetary and non-monetary values. Again the silver coin of Rs. 1 which was used in Subcontinent before 1857 was the representative of full bodied money because the value of the metal of such rupees was also equal to Rs. 1. The same like situation was also available in case of gold coins issued under gold standard.
(2) Representative Full Bodied Money:
The money in coins or in paper-lacking its own value may be accorded as representative full bodied money, if it is backed by equal amount of gold or silver. In such case the gold or silver is accumulated by govt. and some representative of such commodities is issued for circulation. As during 1900 to 1930 US govt. issued gold certificates. Such certificates were gold guaranteed which was possessed by US treasury. By giving back a holder of such certificates could entail upon 100% gold equal to the value of certificates. It means that gold and such certificates were equally well. Like gold certificates US govt. also issued 'Silver certificates'. Such certificates were also convertible at official price of 1.29 dollar per ounce of silver. Because of representative money the transaction cost decreased. The cost of melting the gold and silver for coins were also avoided.
(3) Credit Money or Fiat Money:
The money whose face value is more than its intrinsic value is called credit money. In other words, the money whose non-monetary value is more than its monetary value is given the name of credit or fiat money. Thus all the coins and paper currency notes which are in circulation in a country represent credit money. In addition to official currency, the cheques of commercial banks also represent credit money because the face value of cheques is far more than value of cheques as papers. The credit money - the major component of money supply of present time is decomposed into two parts:
(i) The credit money issued by govt. or central bank.
(ii) The credit money issued by commercial banks of a country.
(i) Credit Money Issued by Govt. and Central Bank:
The coins which are issued by Govt. and central bank have more face value as compared with the value of metals possessed by such coins. Accordingly such coins represent credit money - as the case of one rupee, two rupees and five rupees coins in Pakistan. The coins which are not full bodied represent token coins. In addition to coins govts. and central banks also issue credit money in the form of paper currency - as the case of all currency notes from Rs. 10 to Rs. 5000 in Pakistan. The paper credit money which is guaranteed to convert into standard money is called convertible paper currency - the case of all currency notes from Rs. 10 to Rs. 5000. While the paper credit money which is not guaranteed to convert into standard money is called inconvertible paper money - as the case of one rupee, two rupee or five rupee coins in Pakistan.
This must be remembered that the coins and currency notes which are issued by govt. and central bank are known as 'Legal Money'. The legal money whose payments and receipts can be made without any limit is called unlimited legal money ..While the legal money whose payments and receipts can be made up to a specific limit is called limited legal money.