What is the difference between commodity money and representative money quizlet? (2024)

What is the difference between commodity money and representative money quizlet?

Commodity money derives its value from the type of material from which it is composed. Representative money is paper money backed by something tangible—such as silver or gold—that gives it value.

What is the difference between commodity money and representative money?

Commodity money is an item used for money that has intrinsic value. Representative money is an item such as a token or piece of paper that has no intrinsic value, but can be exchanged on demand for a commodity that does have intrinsic value.

What is the difference between commodity money and commodity based money?

Commodity money holds value on its own (e.g., a gold coin), whereas commodity backed money represents a specific commodity and the note or coin can be exchanged for a specific amount of the commodity with a guarantee from the issuing authority (e.g., paper money backed by gold).

What is commodity money your answer?

Commodity money is money that has intrinsic value, meaning that it has value even if it is not used as money. Examples of commodity money include precious metals, foodstuffs, and even cigarettes.

What is an example of representative money and commodity money?

Representative money is a certificate or token that can be exchanged for the underlying commodity. For example, instead of carrying the gold commodity money with you, the gold might have been kept in a bank vault and you might carry a paper certificate that represents-or was "backed"-by the gold in the vault.

What is the difference between commodity money?

The value of fiat money is based largely on public faith in the issuer. Commodity money's value, on the other hand, is based on the material it was manufactured with, such as gold or silver. Fiat money, therefore, does not have intrinsic value, while commodity money often does.

Why is representative money better than commodity money?

Representative money is paper currency that can be exchanged for a fixed amount of a valuable commodity, usually gold or silver. Paper currency is convenient because it weighs little and much larger denominations can be printed that weigh no more than single units of currency.

Which is a commodity money?

Commodity money is money whose value comes from a commodity of which it is made. Commodity money consists of objects having value or use in themselves (intrinsic value) as well as their value in buying goods.

What is a commodity money quizlet?

Commodity Money: A good that is used as a medium of exchange but also has intrinsic worth because it has other uses. Gold or silver coins are commodity money.

What is an example of representative money?

Representative money, on the other hand, is a form of currency that represents the intent to pay. The most widely used representative money example is a basic cheque. Apart from cheques, there are a few other types of representative money. These include credit cards, money orders and bank drafts.

What is the meaning of representative money?

Representative money is a certificate or token that can be exchanged for the underlying commodity. For example, instead of carrying the gold commodity money with you, the gold might have been kept in a bank vault and you might carry a paper certificate that represents-or was "backed"-by the gold in the vault.

What are 4 examples of commodity money?

Historically, examples of commodity money include gold, silver, tea, alcohol, and seashells. Even if no one would accept such goods as trade, the owners could still use them for their purposes.

Which of these is the best example of commodity money?

Gold coins are the best example of commodity money. Commodity money is an asset that is backed by a specific commodity.

What is not an example of commodity money?

The answer is d). Commodity money is a type of money that is divisible, durable, can be exchanged, and has intrinsic value. Paper money (bank notes) does not have intrinsic value. Silver and gold are the two examples of commodity monies, though other commodities were used as money in history.

What is the difference between representative and commodity money and give examples of how each was used along the Silk Road?

The value is decided on by the parties involved in the trade. Some forms of commodity money used on the Silk Road were cowry shells, animals, feathers, and beads. Representative money refers to a paper currency that gets its value from a government's promise to exchange it for a certain amount of gold or silver.

What is an example of commodity money quizlet?

Commodity money is money whose value comes from a commodity of which it is made. Examples are gold coins or silver coins.

Why is representative money more useful than commodity money quizlet?

Why is representative money more useful than commodity money? Representative money is portable, durable, divisible, and acceptable.

What are 2 disadvantages of commodity money?

Firstly, the commodity is vulnerable to devaluation as the commodity itself perishes. Next, because quality can not be guaranteed between one sample and another, some commodity money may have lower quality than others.

What are the 4 types of money?

There are four categories of money. They are fiat money, commodity money, fiduciary money, and commercial bank money.

What is the most common form of commodity money?

The most common form of commodity money was dried indian corn, which was used to purchase the item depicted above and described below.

What is the main advantage of representative money?

So if Britain set the price of gold at £500 an ounce, the value of the dollar would be 1/500th of an ounce of gold. The major appeal of representative money was that it was not influenced by inflation. Governments were only able to print money up to the value of the gold they held in their vaults.

What is one problem with commodity money?

One of the major problems with commodity money was quality. Individuals tended to use or sell their best products while their poorest products would be offered as commodity money. Additionally, even good quality commodities would deteriorate if retained too long.

What currency is backed by gold?

Even though national currencies are no longer backed by gold, investors have opportunities to buy the precious metal through various investments, like gold IRAs or gold ETFs, which act as a hedge against market volatility since the value of gold rarely decreases significantly.

Is a $5 bill commodity money?

Today, U.S. bills are backed by the Federal Reserve, but as fiat money. As economies grew and became more global in nature, the use of commodity monies became more cumbersome. Countries moved toward the use of fiat money. Fiat money is legal tender whose value is backed by the government that issued it.

What is an advantage of commodity money?

The primary advantage of commodity money is that commodities tend to have greater intrinsic value. Further, because of this intrinsic value, commodity money is not as susceptible to inflation as fiat money is. Finally, commodity money may be less susceptible to government regulation.

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