Which of the following most accurately explains why commodity money has value?
Which most accurately explains why commodity money has value? Commodity money is a good that can be used as a medium of exchange or for some other purpose.
Why does commodity money have value?
Commodity money has some intrinsic value due to the content of precious metal it is made up of or backed by, but debasem*nt or increases in precious metal supply can cause inflation. Fiat money is backed only by the faith of the government and its ability to levy taxes.
What does commodity money have value based on?
Answer and Explanation:
Commodity money has a value that comes from the intrinsic value of the commodity. This is different from fiat money which gets its value from the government. Commodity money can be converted into a commodity usually at a fixed rate.
Which one of the following is the best explanation of commodity money?
Answer and Explanation:
Commodity money is an asset that is backed by a specific commodity. The commodity is deemed to have an intrinsic value and is not backed by the government decree. Gold coins are commodity money as they are backed by a precious metal, gold, which has a high value.
Which form of money has value because the government says it has value?
Both fiat and representative money possess the value they claim to have. Fiat money is backed by the government that issues it. Representative money is backed by the issuer's assets or financial instruments. 1 For example, a personal check is backed by the money in the issuer's bank account.
What is the value of a commodity?
A commodity value expressed as a price is determined by historical, social and cultural aspects of production and distribution. Karl Marx described price as the money-name for the labour realised in a commodity. A commodity value is dependent on its utility.
What is commodity money explained simply?
Commodity money is money that has value apart from its use as money. Mackerel in federal prisons is an example of commodity money. Mackerel could be used to buy services from other prisoners; they could also be eaten. Gold and silver are the most widely used forms of commodity money.
How is the value of a commodity determined?
The equilibrium price is the price of a good or service when the supply of it is equal to the demand for it in the market. Thus the market equilibrium for a commodity is determined by balancing the forces of demand and supply for the commodity.
What are the advantages 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.
What is an example of commodity money?
Examples of commodity money are gold and silver coins. Gold coins were valuable because they could be used in exchange for other goods or services, but also because the gold itself was valued and had other uses.
What is the most common form of commodity money?
Glass beads: Gold: has been widely used as a form of commodity money across different civilizations and time periods. Its scarcity, durability, and desirability have made it a valuable medium of exchange. Silver: similar to gold, silver has also been used as commodity money.
What is the value of money?
In some ways, the value of money is simple to understand. Since money is just a medium of exchange, it's worth whatever you can exchange it for. In other words, money is worth what it will buy. Given economic factors like inflation, interest rates, and others, money's value can also be complex.
What is the difference between commodity money and commodity based money?
Therefore, commodity money has its intrinsic value. In contrast, commodity-backed money does not have any intrinsic value except that an individual possessing it can exchange it for a precious item such as gold.
What provides money value?
The value of money is determined by the demand for it, just like the value of goods and services. You can measure the value of money by what people will exchange for it and by how much of it there is.
What is the value of money and value for money?
So, what is value for money? Value for money has been defined as a utility derived from every purchase or every sum of money spent. Value for money is based not only on the minimum purchase price (economy) but also on the maximum efficiency and effectiveness of the purchase.
What is an example of value for money?
There are a few different ways to calculate value for money. One method is to compare the cost of an item with its expected life span. For example, if you are buying a new car, you would expect it to last for several years. If you are only planning on using it for a short time, then it may not be good value for money.
What is the 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.
How do commodity funds work?
Commodity funds invest in raw materials or primary agricultural products, known as commodities. These funds invest in precious metals, such as gold and silver, energy resources, such as oil and natural gas, and agricultural goods, such as wheat.
What is commodity money and how was it used?
Money is the collection of objects that are used as media of exchange. Commodity money is a medium of exchange that may become (or be transformed into) a commodity, useful in production or consumption. This is in contrast to fiat money, which is intrinsically useless.
What is the difference between money value and commodity value of money?
Thus, money value of a paper note is what is written on it, i.e. Rs 100, Rs 500, etc. You can buy goods and services worth of that amount in the market. Commodity value of money refers to value of the material out of which coins or currency notes are made.
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.
Why is money important?
A Tool To Improve Lives
At its core, money serves as a tool to facilitate our aspirations, both immediate and future. Money satisfies the human need to spend and to save, as necessary conditions to survive and to thrive. Money is a manifestation of our collective efforts to better our lives.
What are the 4 main functions of money?
The Four Basic Functions of Money
Money serves four basic functions: it is a unit of account, it's a store of value, it is a medium of exchange and finally, it is a standard of deferred payment.
What is commodity money also known as?
Commodity money is also know as standard money because it is the monetary unit which is approved by the government to act as the legal tender in the currency system and in which other types of money in the economy like bank draft, promissory not etc. is convertible.
What are the characteristics of commodity money?
It consists of tangible items like gold, salt, or silver that have value in themselves and serve as a medium of exchange. Commodity money is a physical object used in trading that has no value outside of its established role as currency.
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