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Types of money

  • Commodity money is a good the value of which serves as the value of money. Gold coins are an example of commodity money. In most countries, commodity money has been replaced with fiat money.
  • Fiat money is a good, the value of which is less than the value it represents as money. Dollar bills are an example of fiat money, because their value, as slips of printed paper, is lesser than their value as money.
  • Bank money consists of the book credit that banks extend to their depositors. Transactions made using cheques drawn on deposits held at banks involve the use of bank money.

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