Types and forms of money - SS1 Commerce Lesson Note

The types and forms of money can be categorized as follows:

·         Commodity Money: This type of money has intrinsic value as a tangible commodity. Historically, items such as shells, salt, or precious metals like gold and silver have been used as commodity money. These items were widely accepted and had value beyond their use as money.

·         Representative Money: Representative money is a form of currency that represents a claim on a commodity, typically precious metals. It includes items like paper notes or tokens that can be exchanged for the underlying commodity upon request. Representative money was commonly used when it became impractical to carry or exchange the actual commodity.

·         Fiat Money: Fiat money is the most common form of money used today. It has value because the government declares it as legal tender, meaning it must be accepted as a form of payment. Fiat money does not have intrinsic value; its worth comes from the trust and confidence placed in the issuing government and the stability of the economy.

·         Physical Cash: Physical cash refers to tangible forms of money, such as coins and banknotes, that can be held and exchanged directly between individuals. These physical representations of money are widely accepted and commonly used for day-to-day transactions.

·         Digital Currency: Digital currency, also known as electronic money or digital cash, exists only in electronic form. It includes various forms of digital payment methods, such as bank transfers, online banking, credit and debit cards, and mobile payment apps. Digital currency allows for quick and convenient transactions through electronic means.

·         Cryptocurrency: Cryptocurrency is a digital or virtual form of currency that uses cryptography for security. It operates on decentralized networks called blockchains and is not issued or regulated by any central authority like a government. Examples of cryptocurrencies include Bitcoin and Litecoin.