Question

State the types of money​

Answer 1

Answer:

1. commodity money
2. fiat money
3. fiduciary money
4. bank money

Answer 2

There are three types of money :

1. Commodity money
2. Representative money
3. Fiat money

1. Commodity money :

Money that's in the form of a commodity with intrinsic value is considered commodity money. 'Intrinsic value' means it has value outside of its use as money. For example, gold has been used as commodity money for thousands of years. Suppose Margie decided to pay Mike with a gold bar that she inherited from her European grandfather - this would be an example of commodity money being exchanged.

2.Representative money :

Representative money is not money itself, but something that represents money. It is exchangeable for a commodity. During colonial days in America, tobacco was a valuable commodity. Somebody could pay for the goods and services that they needed using tobacco, and it would be accepted just like money was.

3. Fiat money :

Fiat money gets its value from a government order (i.e., fiat). That means, the government declares fiat money to be legal tender, which requires all people and firms within the country to accept it as a means of payment. If they fail to do so, they may be fined or even put in prison. Unlike commodity money, fiat money is not backed by any physical commodity. By definition, its intrinsic value is significantly lower than its face value. Hence, the value of fiat money is derived from the relationship between supply and demand. Most modern economies are based on a fiat money system. Examples of fiat money include coins and bills.