Question

Write about the evolution of Money.

Answer 1

Money has evolved through different stages according to the time, place, and circumstances.

• Commodity Money:
  In the earliest period of human civilization, any commodity that was generally demanded and chosen by common consent was used as money. Example Goods like furs, skins, salt, rice, wheat, utensils, weapons, etc. Such an exchange of goods for goods was known as the ‘Barter Exchange’.
• Metallic Money:
  With the progress of human civilization, commodity money changed into metallic money. Metals like gold, silver, copper, etc. were used as they could be easily handled. It was the main form of money throughout the major portion of recorded history.
• Paper Money:

1. It was found inconvenient as well as dangerous to carry gold and silver coins from place to place. So, the invention of paper money marked a very important stage in the development of money.
2. Paper money is regulated and controlled by the Central bank of the country (Reserve Bank of India). At present, a very large part of money consists mainly of currency notes or paper money issued by the central bank.

• Credit Money or Bank Money:

1. The emergence of credit money took place almost side by side with that of paper money. Example Cheque.
2. The cheque (known as credit money or bank money), itself, is not money, but it performs the same as functions of money.

• Near Money:
  The final stage in the evolution of money has been the use of bills of exchange, treasury bills, bonds, debentures, savings certificates, etc.