Types+of+Money


 * Types of Money**

There are two types of money. They include:

1) Commodity Money This is money that is also a good or a raw material. It has another purpose another than money. Some examples are: gold, shells, cigarettes (still used in jails), and beaver pelts (pre-Canada) Gold is the most common example of commodity money but has several problems. First of all, it was heavy to carry around and could be easily stolen. Second, it could be easily replicated. Gold dust could be created by shaking gold coins in a bag which could then be made into more coins. Finally, gold eventually would lose its value because whenever they created new coins with the old ones, a base metal (like lead), was added.

2) Fiat Money This is money that is declared money by the government. The only value it has is as currency. The value of money is determined by supply and demand. Some examples include: loonies, toonies, and bank notes. This is the money we use today. Just because it’s a $1.00, doesn’t mean it costs a $1.00 to create it.

So what is not considered money? Some examples include:

1) Gold 2) Financial securities like stocks and bonds 3) Credit cards – are simply a loan 4) Debit cards – are just a way to access your money and are not actually money 5) Cheques [] Page 253 – 257, “Principles of Macroeconomics: Edition 6”, Sayre & Morris From the notes and lectures of Dr. Stephanie Powers – ECON 101