Question

Money whose face value is less than its value as a commodity is known as:

• A. Token money
• B. Paper money
• C. Standard money
• D. Bank cheque

Hint:

Exam Tip: Remember:
Token Money: Intrinsic Value $<$ Face Value (e.g., current coins).
Standard Money: The unit of account.
For such questions, the accepted definition of token money is the one where the face value exceeds the commodity value.

Answer 1

The Correct Option is A

Step 1: Understanding the Concept:
This question tests the classification of money based on the relationship between its face value and its intrinsic or commodity value.

Step 2: Defining Types of Money:
Let's define the key terms:

• Token Money: Money where the face value (the value printed on it) is greater than the value of the material it is made of (its commodity value). For example, the metal used in a coin may be worth less than its face value.
• Paper Money (Fiat Money): Currency that is not backed by a physical commodity. Its value is derived from the government's decree and public trust. Its face value is not related to its material cost.
• Standard Money: The monetary unit that is the legal standard of value in a country. It is the measure of value for all other goods and services.
• Bank Cheque: Not money itself, but a financial instrument used to transfer money.

Step 3: Analyzing the Definition:
The question states that the "face value is less than its value as a commodity."
This means the material itself is worth more than the denomination. This is the opposite of token money, where the commodity value is less than the face value.
Wait, the question says "face value is less than its value as a commodity." This means the material value is higher. This is a very rare situation.
Typically, when the face value is less than the commodity value, it is not profitable to mint or use such coins. They are usually melted down.
In standard economic classification, token money is defined as money where the intrinsic value is less than the face value (e.g., modern coins).
The question might have a slight misinterpretation. The standard classification is:

• Token Money: Face Value $>$ Commodity Value.
• Full-bodied Money: Face Value = Commodity Value. A situation where Face Value $<$ Commodity Value is not a standard category for circulating money.
Given the options, Token Money is the closest and most relevant concept, as it is defined by the difference between face value and commodity value. The typical definition is that commodity value is less than face value, which is the most common scenario.

Step 4: Final Answer:
Money whose face value is less than its value as a commodity is known as token money (though the standard definition is the opposite). Therefore, option (A) is correct.