Question

What are the different forms of modern money?

What are different forms of money used in modern age?

Answer 1

Modern money exists in various forms beyond traditional coins and notes. The main forms of modern money include:

1. Currency: This includes paper notes and coins issued by the central bank (like the Reserve Bank of India). It is the most commonly used form for day-to-day transactions.
2. Deposit Money: Deposit money, often known as bank money, refers to deposits stored with banks that can be used to draw cheques. Customers deposit paper notes and coins in banks for safety. Each deposit is recorded as a credit to the bank customer's account. These deposits are due on demand and transferable from one individual to another. People can draw cheques against these deposits to make payments. The ‘cheque’ is an instruction to the bank to make a payment or transfer equal to the amount specified in the cheque.
3. Credit Cards: In modern society, credit cards are referred to as "money." In reality, credit cards are not accounted for in the money supply. A credit card is a form of identification that enables the individual to purchase goods on credit. Therefore, the use of a credit card allows for the purchase of products without the need for cash or checks. This implies that credit cards enable individuals to acquire products without the use of money; however, all transactions are ultimately resolved through the use of money, which continues to serve as the medium of exchange.