MONEY AND INFLATION — Economics STD 12 Commerce — Question
Gujarat BoardEnglish MediumSTD 12 CommerceEconomicsMONEY AND INFLATION3 Marks
Question
Explain the Types of Money.
✓
Answer
On the basis of monetary evolution, time and circumstances there are the four phases of money.
$(1)$ Commodity money
$(2)$ Animal money
$(3)$ Metal money
$(4)$ Paper money
$(5)$ Plastic money
$(6)$ Banking money
$(1)$ Commodity money:
During the primitive phase of human civilization, commodity money came into existence.
Various goods like animals, food grains, seashells, tobacco, salt etc. were used as money.
Due to the several drawbacks, commodity money was considered as an invisible means of exchange.
$(2)$ Animal Money:
Animals were used as a means of exchange in India.
Human beings used to do production of crops and in return they used to get animals and other required commodities.
Animals like cow, buffalo, horse etc. were used as a means of exchange and store of value function.
Animals are mortal they get sick and die, therefore the storage of wealth in the form of animals was not advisable.
$(3)$ Metallic Money:
As the society progressed, precious metals like gold, silver were considered as the medium of exchange. Gold and silver coins are used more.
E.g. In Britain, gold coins were used while in other countries of the world they used silver coins.
Metalic money found prominence due to wide acceptability, limited in supply, durability and divisibility.
$(4)$ Paper money:
Supply of gold and silver was not enough to match the requirements of increasing volume of trade, back of safety of precious metals, inconveniency during large transactions due to above reasons metallic money was discarded. Paper money came into existence most of the countries are using paper money as a medium of exchange to meet the large volume of internal & external trade.
$(5)$ Plastic money:
Credit and debit cards are used as medium of exchange introduced by banks.
Credit and debit cards are used in the form of currency.
$(6)$ Banking money:
Many countries of the world are using metallic money and paper money and have started doing transactions through banking money also.
Cheque, Draft, Credit-note, Ecommerce etc. type of instruments are used for the payment of loans and installments and for the payment of goods and services.
In most of the developed countries all the transactions are done by banking money.
In developing country it is less popular.
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