In: Finance
6. Define or discuss briefly: a. Full-bodied money b. Representative full-bodied money c. Credit money d. Fiat money
Answer: Classification of Money can be done on the basis of relationship between the value of Money as Money and its value as a commodity.
Broadly it is classified in to these 4 types only.
Full Bodied Money: When Face value and Intrinsic value is equal. Money value = Commodity value. Example. Silver Coin during British Period. whose silver value(commodity value) was also equal to the Coin value.
Representative Full Bodied Money: Value of representative full bodied money is much higher than its value as a commodity. Usually its a paper money, backed 100% by metallic reserve of Gold or Silver. Example: Convertible paper receipts. a person can exchange the amount on paper for equal value of Gold.
Credit Money :Money Value far greater than Commodity Value.Example: face value of $100 is $100, but if we sell it as piece of paper we would get very low value
Fiat Money:Declared legal tender. Backed by country's government instead of physical commodity. Its value is not determined by the material it is made.