Full Bodied Money and Fiat Money

Full Bodied & Fiat Money Assignment Help

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Full Bodied Money and Fiat Money

Every unit of money has two values, viz., face and intrinsic value. Face value is the value which is written on the unit of money. It is the value for which the unit of money is being legally exchanged. For example, the face value of Indian Rupee is equal to one rupee. Goods worth one rupee can be legally purchased by giving the coin. Intrinsic value on the other hand is the value of the metal contained in the coin. For example, the silver rupee in India contained a certain amount of silver in it. If the coin were to be sold as silver, then that value for which the silver is being sold is known as the intrinsic value.

Any coins whose face value and intrinsic value are equal, is known as a full bodied. Gold sovereign of Britain or the silver rupee of India were full bodied money because if they were not used as money, then gold or silver could be sold in the market at the same price at which that coin could be used. But these days the face value of the coins is different from their intrinsic value.


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