Before we talk about the 10 Forms of Money, let’s know what money is.
What is Money
Money is anything that can be accepted as a medium of exchange and in settlement of debts.
Tade by Barter were used in the past as a form of trading in which goods are exchanged directly for other goods without the use of money as a medium of exchange.
Trade by Barter had many setback, that’s why money was invented to replace tlTrade by Barter.
10 Forms of Money
- Commodity money
- Bank notes
- Partial money
- Legal tender
- Token money
Coins is one of the 10 Forms of Money.
Coins are precious metals made of silver, which have a defined amount of metallic content. They also have an official stamp of authority placed on them. Coins are homogenous and indestructible, e.g.5k, 25k and #1.
This is the type of money which has value as both money and commodity. Commodity money is valuable for its own sake since it can be put to some other uses. They can be used as medium of exchange, e.g. gold, diamond, cattle and beads.
These are slips of paper or currency issued by the central bank. Paper money originated from the receipts issued by goldsmiths to those who deposited precious metals, e.g. gold, with them for (10) safe keeping. These are in denominations and are portable, e.g. 50 Koba, 100 Naira and 500 Naira.
These are representatives of money which may be legal tender. They are acceptable within a certain restricted area. Partial money is not made mandatory for acceptance by all the people. They are not backed by law and examples include petrol vouchers, tickets and cheques.
Lengal tender is also on this list of 10 Forms of Money.
A legal tender is any means of payment by which a trader is compelled by the law of a state to accept in settlement of debt, e.g. Dutch mark. This is money which has the backing of the law and it is an offence to reject it.
This is a form of money with a face value which is greater than the value of the metal content. Token money has a face value in excess of its metal content, i.e. the intrinsic value is less than the face value.
This is a form of money kept in the accounts of the bank. Any money saved in the bank will be credited to the account of the depositor. The money in the deposit can be transferred through the use of cheque. Cheque is just an order to pay somebody and not to be considered as money.
Fiat Money is also on the list of the 10 Forms of Money.
Fiat money is any money the government has declared to be legal tender but is not backed by reserve Paper money is fiat money since it can no longer be redeemed for gold and its intrinsic worth is almost nil.
Fiduciary note is an issued bank note not backed by gold but by government securities.
This is also known as near money and can be described as money assets that serve temporarily as yas money and are convertible into money in a short time without los of value, e.g drafts, bonds, treasury bills, cheques and promissory notes.
That’s all on the 10 Forms of Money. Drop your comment below, we will really love to hear from you.