Guide to Various Forms of Money

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Money is a term for referring the equivalent of value, and takes the form of conceptual objects for example, coins, credit or securities such as banknotes, checks or drafts. Money is a means of exchange and does not itself directly satisfy the needs of an exchange partner, but can be employed on the basis of general recognition to further exchange of goods or services.

Almost all present day monetary systems are established on the basis of fiat money, which does not have intrinsic practical value as a physical commodity. Instead, gains value by benefiting from government declaration as legal tender, to assume acceptance for payment purposes.

As a result, money can function as a store of value, as a measure of value and unit of account. The value of one unit of money is referred to as purchasing power and by facilitating the exchange of goods and the taking and repayment of debt.
   
Another form of money produced through trade activities is credit money, with which a claim against a debtor is used to pay for goods and services. In the early days, under the gold standard, the currency of gold mark was defined by corresponding a fixed number of gold marks to the value of one kilogram of fine gold.

Until the beginning of the twentieth century monetary standards in numerous countries, defined the monetary value in the used currency units as the value of a fixed quantity of the precious metal gold or silver.

In the modern day, the money supply of a given national territory comprises of currency signified by banknotes, coins and demand deposits or bank money. In most instances demand deposits are actually far much greater in terms of money supply than currency, although bank money is intangible and exists in official bank records. But it is still as powerful and relevant in that it also facilitates economic activity, and is fully accepted as a form of payment.

Electronic money is a relatively new form of money, it derives monetary value in the form of a claim on the issuer saved on disk, and rendered  through a cash card. However, credit cards are not electronic money, they only serve as identity cards to access accounts, although some call them plastic money.

The banks can recoup money on cash accounts by providing their customers against the pledging of collateral mortgages on real estate, securities and loans.

Interest rates that emerge in this credit market are determined by supply and demand. It represents the transfer taking place as the price of credit or loan. Whenever, the rate of supply of money is low, the interest rate rises. This in turn increases the incentive for others to provide money, while the opposite of this trend means the rate falls.

 

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