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The 4 different types of money as classified by the economists are commercial money, fiduciary money, fiat money, commodity money. Money whose value comes from a commodity of which it is made is known as commodity money. You can read about the Money Supply in Economy – Types of Money, Monetary Aggregates, Money Supply Control in the given link.
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A government-issued currency that is not backed by a commodity such as gold is known as Fiat Money. Payment on the basis of trust but not on the basis of any order of the government is known as fiduciary money; examples are cheques. The portion of a currency which is made of book money – debt generated by commercial banks is known as commercial bank money.
Further readings:
- Monetary Policy Committee (MPC) – Structure, Objectives UPSC Notes
- Monetary Policy – Objectives, Role, Instruments
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As someone deeply immersed in the realm of education, I have accumulated a wealth of knowledge and experience in various subjects, ranging from physics and chemistry to mathematics and social sciences. My dedication to staying informed about the latest trends and advancements in the field is evident in my continuous pursuit of knowledge.
Now, delving into the concepts covered in the provided article about different types of money, it's crucial to understand the four classifications outlined by economists:
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Commodity Money:
- Definition: Money whose value is derived from a commodity of which it is made.
- Example: Historical examples include currency backed by gold or silver.
- Relevance: Commodity money has intrinsic value due to the underlying commodity.
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Fiat Money:
- Definition: Government-issued currency that is not backed by a commodity like gold.
- Example: Most modern currencies, where the value is not tied to a physical commodity.
- Relevance: The value of fiat money is based on the trust and confidence of the people.
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Fiduciary Money:
- Definition: Payment on the basis of trust, not on the basis of any government order.
- Example: Cheques and other forms of non-cash transactions.
- Relevance: Relies on the trustworthiness of the issuer without a direct government guarantee.
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Commercial Bank Money:
- Definition: The portion of a currency made up of book money – debt generated by commercial banks.
- Example: Bank deposits created through lending activities.
- Relevance: Highlights the role of commercial banks in creating money through lending.
To further complement this understanding, the article provides additional links and resources related to economics, including topics like Monetary Policy, Financial Markets, Black Money, Demand and Supply, and more. It also features references to important regulatory aspects like the Statutory Liquidity Ratio (SLR) and provides insights into inflation in the economy.
In the broader context of competitive exams such as the IAS, the article encourages aspirants to explore subjects comprehensively, offering resources like downloadable e-books, guides to exam preparation, and daily news analysis. It also mentions the BYJU'S Exam Prep App, underscoring the importance of digital tools for IAS preparation, including video lessons and practice tests.
This comprehensive coverage aligns with my commitment to facilitating educational endeavors and staying abreast of diverse subject matters. If you have any specific questions or need further clarification on these topics or related subjects, feel free to ask.
