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What are the different stages in the evolution of money? Or Explain the different types of money.

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The evolution of money has passed through various stages with the development of civilization. 

Following are the various stages of money which evolved gradually with the need and time: 

(a) Animal money: In the primitive age (prehistoric period) animals like cows, goats, sheep, etc. were used as a common medium of exchange. In hot climatic countries cow, ox, etc. were chosen as a medium of exchange. 

(b) Commodity money: In certain countries, commodities like shells, wheat, rice, tobacco, wool, fur, salt, etc. were used as money. In cold countries, skin and fur were used as a medium of exchange. But due to the lack of uniformity and storage, metallic money was evolved. 

(c) Metallic money: With the progress of civilization, precious metals like gold and silver came into use as money. Initially, metallic money was imperfect in size, shape, weight, etc. But the scarcity of precious metals gave rise to the of use of metallic coins. 

(d) Metallic coins: Use of metals led to the introduction of coins. Rulers in olden times affixed their seal on metallic money. These coins were of two types. 

  • Standard or full-bodied coins : Coins for which the face value is equal to its intrinsic (metal) value are known as standard or full-bodied coins. E.g. gold and silver coins. 
  • Token coins: Coins for which the face value is greater than intrinsic value are known as token coins. E.g. coins made of nickel, copper, aluminium, etc. In India token coins are of ₹ 1, ₹ 2, ₹ 5, and ₹ 10. But difficulties in the transportation of token coins gave rise to paper money. 

(e) Paper money: Paper money is made of paper. In India all currency notes of ₹ 5, ₹ 10, ₹ 50, ₹ 100, ₹ 200, ₹ 500, and ₹ 2000 are issued by the Reserve Bank of India (RBI) on behalf of the Government of India. Paper money has a very small intrinsic value of its own. 

(f) Bank money or Credit money: Bank money refers to bank deposits. This can be withdrawn or transferred on demand by means of cheque, demand draft, etc. These are not legal tender money, but through credit instruments, money can be transferred from one place to another and from one person to another. Today most of the big payments are made or received through cheques.

 (g) Plastic money: In recent years due to the advancement of technology use of plastic money like credit cards, debit cards also have become very popular. 

(h) Electronic money: It is the most recent development of money. Funds are electronically transferred through mobile phones, smart cards, etc. With this invention, transactions through worldwide have become very easy and popular.

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