Question

In: Finance

6. Define or discuss briefly: a. Full-bodied money b. Representative full-bodied money c. Credit money d....

6. Define or discuss briefly: a. Full-bodied money b. Representative full-bodied money c. Credit money d. Fiat money

Solutions

Expert Solution

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.


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