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Actual Money of Demand

J.M. Keynes in his Treatise on Money has distinguished between actual money and money of account. Actual money is that money which actually circulates and is current in practice in a country. Actual money is the medium of exchange of goods and services in a country. It is in the shape of actual money is the medium of exchange of goods and services in a country. It is in the shape of actual money that all payments are made and a store of general purchasing power is held. For example, in India, the cons and paper notes of various denominations are actual money.

Money of account is “that in which debts and prices and general purchasing power are expressed. It is that form of money in terms of which the accounts of a country are kept and transactions made.” The monetary unit in which the money of account is expressed may not exactly be a circulating medium.

Generally speaking, money of account and actual money are not different. At certain unusual time they might, however, be different. For instance, during the hyper-inflation of 1920’s in Germany, all payments were made in terms of German Marks. But the money of account changed to the US dollar or Swiss franc because of relative stability in their value.