Answer to Question #308441 in Macroeconomics for VAISH

Question

What is the history of money? (Step by step explain how humankind moved from barter trade to the kinds of money with have to day).

Answer 1

Money is any form of valuable unit of account that is valuable and is generally acceptable by both parties as a means of exchange and as well as mode of payment. However, throughout history, both the usage and form of money have evolved. Below are the stages that money has evolved through;

I) Commodity money

This was the earliest mode of exchange. It involved exchange of goods for goods. People who had some goods and wanted to exchange and in return get different goods, when they met with those with similar urge of exchanging goods and agreed, finally they exchanged.

II)Metallic Money

As human civilization progressed, people moved from exchanged goods for goods and now advanced to exchanging goods for metallic money such as gold, silver, copper among others. They were regarded as easily portable.

III)Paper Money

Due to the danger and inconveniences of carrying these precious medals such as gold, people invented paper money which regarded as safe as compared to metallic money. These paper money can easily be regulated by the Central Bank of a country.

IV) Credit Money

These form of currency work hand in hand with paper money. People opt to keep their wealth in banks in form of credits and can make withdraws at their convenience time and place by use of cheques.

V)Plastic Money

The latest type of money is plastic money in the form of Credit cards and Debit cards. They aim at removing the need for carrying cash to make transactions.