Senin, 18 Maret 2013

Types of Money by is Intrinsic Value



Types of Money by is Intrinsic Value

          Based on the relative value of its purchasing power, pr its nominal value, if compared with tis material value, money can be categorized as full-bodied money and token money.
          Full-bodied money has a material value (intrinsic value) equal its nominal value (purchasing power). In other words, this kind of money has a full value as set by the gold standard. In the gold standard, the value of such money is equivalent to the value of metal contained within the money. For example, if the money is made of gold weighing 5 gram, then its purchasing power (nominal value) is the same as the prince of 5 gram of gold.
          Token money has an intrinsic value which is much less, or even negligible, compared to its nominal value. Generally, token money is paper money. A bank note of Rp. 10,000 (ten thousand rupiah) that you have in your pocket perhaps has its  material (paper) value of just Rp200 (two hundred rupiah).

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