Question

Explain the following term:

Token money

Answer 1

Coins are a form of token money. Token money refers to money whose face value is greater than its intrinsic or metallic value. Modern token coins are generally made from inexpensive metals like nickel, copper, or bronze, and they are usually issued in lower denominations. For example, a ten-rupee coin has a face value far exceeding the value of the metal it contains. The authority to mint coins lies exclusively with the government. Coins serve as a convenient medium for small-value transactions. Their primary function is to facilitate the exchange of small amounts of money. However, in today‏’s monetary system, metallic coins represent only a minor portion of the total money supply.