Hi friends, in today’s article we are going to know about the concept of token money and also know the merits and demerits of this money. So let’s discuss in details.
Table of Contents
Token Money Meaning
The money whose face value is more than its intrinsic value is called token money. They are made of cheaper metals like, nickel, copper, etc. It is minted by the government and three is no free coinage of it. Token coin is limited legal tender.
Distinguish between Full bodied money and Token Money
(i) The face value of full bodied money or standard money is equal to its intrinsic value, whereas the face value of taken coin is more than its intrinsic value.
(ii) Standard money are made of gold or silver of a well-defined weight, purity and fineness. On the contrary, token money are made of inferior metals such as copper, aluminum, nickel, etc.
(iii) There is free coinage of standard money and the mint is open to the public. But, token coin is minted by the government and there is no free coinage of it.
(iv)Full bodied money is unlimited legal tender. On the other hand, token coin is limited legal tender.
Merits and Demerits of Token Money
Following are advantage and disadvantages of token money –
Merits or Advantages
• It is more economical than the standard money because it does not use valuable metals.
• The supply of token money is more elastic because it can be easily adjusted to its changing demand.
Demerits or Disadvantages
• Token coins inspire less confidence in the holder,
• Fear of inflation is always there,
• They are suitable only for smaller transactions.
• Token coins are not acceptable abroad.
Conclusion
So friends, this was the different types of money in economics or types of money in India. Hope you get the full details about it and hope you like this article.
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