Banking 2010

Besides these forms, money can be classified into several other less important us. These include the following:
i a) Black Money: Black money is one which has been gathered through illegal means. All the wealth obtained through prohibited ways such as gambling, smuggling, crime, robbery etc can be called black money. An important characteristic of the black money is that it is not reported in the calculation of GDP or NI. These are unreported activities and form part of underground economy.
(b) White Money: White money is one which has been earned through legal and legitimate means. The holding of such a money is justifiable .on social, moral, legal and equity basis. Such a money is not merely a wealth but it has satisfaction, content, happiness, associated with it.
Cheap Money: Cheap money is one whose cost of borrowing is less than the standard rate of interest. In times of recessions banks are willing to lend money at a lower rate of interest that generally prevails in the economy. Such a money is called cheap money.
Dear money: In times of boom there is a high demand for money. To control it banks iy increase the interest rate above normal level. The cost of borrowing the money
ir.cn increases. Such a money is called the dear money.
important Note:
Under advantages of metallic money it is written that it can't be hoarded or
xeited. This means that if the value of content of coin is greater than its face value, then
people will melt it into metal block to take advantage of its high intrinsic value. To
understand this suppose government issue coins of 1 rupee. Further suppose thai [hey are
made up of! gm silver. This means the coin that is made up of ! gm silver has face value I rupee but intrinsic (internal) value of 1 gm silver ( Suppo>c 1 gm silver is equal to 5 :s) this will induce people to collect such coins, melt them in ordinary metal blocks •II them for Rs. 5 each. It's result will be that very soon coins will disappear from the
nirket and there will be liquidity problem.