Types of easy money
With this in mind, it is not surprising that there were different types of money throughout history. Commodity Money Commodity money is the simplest and, most likely, the oldest type of money.
Commodity money is closely related to and originates from a barter system, where goods and services are directly exchanged for other goods and services. Unlike commodity money, fiat money is not backed by any physical commodity.
Most modern economies are based on a fiat money system. Examples of fiat money include coins and bills.
Fiduciary Money Fiduciary money depends for its value on the confidence that it will be generally accepted as a medium of exchange. Unlike fiat money, it is not declared legal tender by the government, which means people are not required by law to accept it as a means of payment. Instead, the issuer of fiduciary money promises to exchange it back for a commodity or fiat money if requested by the bearer.
As long as people are confident that this promise will not be broken, they can use types of easy money money just like regular fiat or commodity money. Examples of fiduciary money include cheques, banknotes, or drafts. More specifically, commercial bank money is created through what we call fractional reserve banking.
In a Nutshell The four most relevant types of money are commodity money, fiat money, fiduciary money, and commercial bank money.