Classification of money

With the development of Civilization significant changes have been noticed in the form of currencies. In the ancient times the form of currencies would not as they are today. Long long ago stone on leather made coins were used. Later made of gold silver also came into existence. Today metals and paper are being used to make currencies. Plastic currency also has came into fashion.

Classification of money on the basis of nature:-

This classification has been done by a classical economist J.M. Keynes. In the classification of money  he has mentioned (1) actual money

(2) money of account.

 

(1) actual money:

 The actual money refers to that money which comes in circulation through the medium of exchange. the money used for storage of purchasing capacity and also for deferred payment is called actual money itself. Rupees for India , Dollar for America, Yen for Japan, Franc for France, Dinar for Iraq, and Mark for Germany etc. Are all the actual currencies for the respective currencies.

Professor Keynes has subdivided the actual money in following two subheadings.

(a). Commodity money:- commodity money is made up of any metal. so metal money is also an example of commodity money. Usually original value of such money is either equal or almost equal to its marked value. when marked value and internal value of commodity money is equal it is called full bodied money.

(b). Representative money:-  

representative money is that money which prevails in the form of medium of exchange but it has no internal value of its own. Circulation of such money other depends on metallic fund or on the faith of government. Paper money is suitable example of representative money.

(2). Money of account:-  money of account means that money in which book of account are recorded. it may be possible that the actual money and the money of account of a country are different. For example after the the world war first the actual money prevailing in Germany was mark but book of accounts of all transactions were done in Franc or US dollars. In India actual money as well as money of account both are same example :- Rupees

According to professor seligman the above mentioned both type of money is actual money or ideal money similarly, Professor Benham  term them as unit of currency and unit of accounting.

Classification of money on the basis of legality. 

On the basis of legality money has been classified into two types:-

1)Legal tender money

2)Optional money

1) Legal tender money refers to that money which has been approved by government and it is recognised throughout the country as source of payment. Since been legally approved nobody can deny it from taking or accepting as payments. paper money and metallic money in India are the examples of legal tender money by cheque bill of exchange and the other credit instrument are not legal tender money.

Legal tender money is also subdivided into two types :- 

a) Limited legal tender money:- When it is made a compulsion to accept any money to a certain limit then this money is termed as  Unlimited Legal Tender Money. It means no one can be come legally to accept the same on this limit. for example a certain limit of amount is fixed for accepting metallic money and then one can't we complete to accept the metallic money for the payment  beyond the limit.

(b). Unlimited legal tender money:-this is that money which can be used for making payments to any extent. in other words this is that money which has been accepted and used by the public on a large scale.in India all metallic money from 50 Paisa coin and beyond as well as paper money of all value is unlimited legal money.

(2). Optional money:-  optional money refers to that money which is commonly accepted by the public on the basis of Faith but nobody can bound to accept it legally checks bill of exchange hundi are common  examples of of optional money.

No one can be bound or forced to accept it in place of payments.

Classification of money on the basis of money commodity:- money can be classified into two types on the basis of money commodity:-

1). Metallic money:- currency which is made up of metal is called metallic money.

In ancient times the metals for commodities which are used as money for payments or for exchange for not similar to each other but as time passed people started using gold and silver as money for exchange since then the art of coinage along with the specific trade mark come into practice. The process of manufacturing and framing coins is called coinage and the manufacturing unit of factory where coinage is built is called mint. During coinagecoins of specific value are produced of equal shape and size and can be easily recognised.

There are two types of coinage:-

1)Free aur unlimited coinage:- In this system of coinage people are free to go to mint and exchange their metals with coins are coinage their metals. This metal system prevailed in India till 1893 and in England till 1931. but with the extension or emergence of full bodied coins this system came to an end. free aur unlimited coinage is further subdivided into three types.

a) gratuitous coinage:- If the government does not charge any expense or commission from the people for unlimited coinage then it is called practice coinage.

b) non gratuitous coinage or brasage:-  when government charges expense aur commission from public for the coinage then it is called non gratuitous coinage or brassage.

c)Seiniosage:-  when the government charges more that the actual amount of brass age as the expense for coinage then the extra money becomes a a profit for the government. That is why it is called Seiniosage. it is the difference between actual expense and expense charged.

2)Limited coinage:- Under this system the public is not allowed to presaging the metal in the mint. The government reserves all the rights for the brass age of coins.  The quantity of coins to be produced is also decided by the government. The government purchases the metal from the market and then it makes arrangement for coining the metal. Now a days Limited coinage system is prevailing through out the world. in India coinage is limited since 1893 after the recommendation of  Herschel committee.

Types of metallic money:-

Metallic money is divided into two types:-

a)Standard or full bodied money :-  standard or full bodied money coins are paradgim as prominent coins. these coins circulate in the country as an actual money as well as money of account. Their face value, marked value and internal value are almost equal. these coins may be made of either same metal or different metal when coins made of one metal are in circulation they are called monometallic while coins made of two metal are called bimetallic coins. 

b)Token money:-  token money refers to those coins who are marked value is more their internal value. These coins are made of cheap metals like nickel copper brass. There open coins does not take place. Their market value is fixed by government token coins are are also called Fiat money.