Type of Money

There was not any sudden change from barter to money. In fact this process took a long time. Money itself also went through different stages of evolution and changed different forms. Broadly speaking, there are following different kinds of money.

Commodity money, Metallic money, Paper money, Bank money, Plastic money 1. Commodity Money:
Commodity money can be thought of as the earliest form of the money. In ancient times money was in the form of different goods that were commonly used by people in everyday life. Examples include iron tools, war equipments, swords, knifes^ animal skins, animal teeth, fish teeth, jiets, crops, stones etc. Most of these commodities were non-monopolised in supply and further they were frequently needed by majority of the inhabitants of the society. The supply of these commodities were usually governed by scarcity and cost of production. However, the problem was that different societies were using different goods as money. So, there was no standardised unit of account or meas>"value. Trade among the members of the same society was relatively easy  were many hurdles in cross border" trade
Metallic Money:
Metallic money comes next to commodity money. As the name suggest, it consists of different metals such as gold, silver and iron etc. People started using these metals as money because they were scarce. In the modem economy, the coins are the form of metallic money. Metallic money (a coin as they are now called) are of small denomination and their intrinsic value (i.e., the value of metal content) is much lower .than their face value.
Advantages:
1. They can be conveniently kept.
2.They can be rapidly converted into other type of currency.
3. There is no chance of hoarding or melting as intrinsic value of metal is less thanthe face value.
Disadvantages:
1. They are only limited legal tender money i.e., they can only be used to discharge debts of a certain limit, .
Metallic money can be further classified in the following two forms:
(a) Full bodied money: It means that the piece of metal that is used as a money hasthe same intrinsic and face value. Intrinsic value means the value of the content ofpiece of the metal. It can also be called the internal value of the metal piece that isbeing used as money. Face value means the value that a metal piece commandsbecause of the status of being accepted as money. When these two values i.e., theinternal and the face value are same, the money is called the full bodied money.

(b) Token money: It means such a money whose intrinsic value is less than its facevalue. So the value of the material of which the money is made up of is less thanthe value that is inscribed over it. The best example of such money is our coins.You can yourself check that a coin of Rs.2 has the face value of 2 rupees but thevalue of the material of which it is made up of is very less than 2 rupees. Theprocess of converting a metal into coins of particular weight and content is calledcoinage of money. The coinage is mostly done by the central monetary authoritiesor govt. A good coinage system has the following features:

(i) The amount of coins in a society is kept under control by the govt. or monetary authorities.(ii) Coins are of equal weight, shape, colour, size etc. and constant use does not produce any significant change in the shape or appearance

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(iii)Supply is regulated in such a way so as to offset liquidity problems faced by society.
(iv) The govt. seal or stamp is marked on each coin. This makes it recognisable and difficult to be copied.
(v) The volume and weight of coins should be such that people can easilvhandle them. '
(viYou must have noted that mostly we give charity or bus fairs in coins. Further you are well aware that when the shopkeeper is short of change' (notes or coins of small denomination), customer face problem in shopping. So in a good coinage system there must be an ease of liquidity in small
transaction.
Paper Money:
Paper money means the currency notes issued by the central bank of country. The 'f this form of money can be traced back to the receipts issued by goldsmiths for ±c deposits held by them. With the advent of printing press and paper making industry jffper currency became the most economical and famous form of money. This form of nooey is most widely used almost in all parts of world. There are three forms of paper *
a Representative Paper Money:
Representative paper money is one which is fully backed by gold or metallic s. This means that the govt. is :n a position to convert all the notes into gold if thkyt m rresented for conversion at the same time. Receipts issued by the goldsmiths can ofc
.r. as an example of representative paper money. For such type of currency the issuing\ •nfaority always has to hold sufficient amount of gold or other metallic reserves. This tacgs inefficiency in'the use of gold which is the major disadvantage of such a currency.
Convertible Paper Money:
It is such a form of money which can be converted into gold and metallic res:, ves not all the notes issued by the govt. are fully backed by gold. The govt. knows that . mx alt the people will come for conversion at the same time, so all notes though •nrvertible but are not fully backed by reserves. Only a particular amoufit pf gold or Uic reserves are kept which are particular proportion of the value of nofes issued.
Fiat Paper Money:
Fiat paper money is one that we have got in our pockets. Neither it is convertible, rt is fully backed by gold or metallic reserves. If you refcti your 100 rupee note, you