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    QN 2

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    officialrrk06
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    QN 2

    Uploaded by

    officialrrk06
    3 views2 pages
    Notes

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    Notes

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    Download as docx, pdf, or txt
    3 views2 pages

    QN 2

    Uploaded by

    officialrrk06
    Notes

    Copyright:

    © All Rights Reserved
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    of 2

    The question captures the evolution of money over time, highlighting how it has transitioned

    from a physical commodity to a more abstract representation.

    The evolution of money can be divided into four stages:

    1.Commodity Money: In this stage, people used commodities such as salt, cattle, and
    shells as a medium of exchange. These commodities had intrinsic value and were
    widely accepted by people.Commodity money can also be defined as a type of
    currency that has intrinsic value based on the underlying commodity it represents.
    Commodity money has several characteristics. First, it is durable and long-lasting,
    ensuring its value remains stable over time. Second, it is divisible into smaller units,
    allowing for easy exchange and transactions of different values. Third, it is fungible,
    meaning that each unit is identical and interchangeable with others of the same
    denomination.

    2. Metallic Money: With the discovery of metals, people started using them as a medium of
    exchange. Metallic money, also known as metal money or specie, refers to coins that are made
    primarily of metal and are used as a medium of exchange in an economy. Historically, metallic
    money has been one of the most common forms of currency. Coins used as metallic money are
    typically made from various metals such as gold, silver, copper, or nickel. These metals are chosen
    for their durability, purity, divisibility, and scarcity, which give them value as a medium of
    exchange. The value of the metal itself often contributes to the value of the coins.

    3. Paper Money: As trade increased, carrying large amounts of metallic money became difficult.
    To solve this problem, people started using paper money, which was backed by gold or silver
    reserves held by the government or banks.Paper money, also known as banknotes or currency
    notes, is a form of physical money widely used as a medium of exchange in many countries. It is
    typically made from a blend of cotton and linen fibers, which gives it durability and a distinctive
    texture. Paper money is issued by a central bank or monetary authority and serves as a legal
    tender, meaning it is recognized by the government as an acceptable form of payment for goods
    and services.

    4. Digital Money: This is when transactions are conducted electronically, without the need for

    physical currency. It represents a piece of paper of no intrinsic value.Examples include

    cryptocurrencies like Bitcoin and Ethereum.With the advent of technology, digital money has

    become the most popular form of money. It includes credit cards, debit cards, online banking,

    and cryptocurrencies.Electronic banking systems, credit cards, and online payment platforms

    have replaced physical cash transactions for a significant portion of economic activity. Money is

    now largely represented by electronic entries in bank accounts or digital payment networks,

    allowing for instant transfers and global transactions.


    CONCLUSSION:
    While money has evolved into an increasingly abstract form, it remains a vital component of
    modern economies. Its value relies on the trust and confidence of individuals and the stability of
    the underlying economic and financial systems. Despite its intangible nature, money continues to
    facilitate economic exchange and serves as a unit of account, a medium of exchange, and a store
    of value in our modern society.

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