What's 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.
Answer and Explanation:
Commodity money is an item that can be used as money, because it has value, but it also can stand alone, such as gold. Representative money is usually a paper form currency meaning it is backed by a commodity, such as gold or silver, in a bank or storage facility.
Representative money has value because the government has decreed that it is an acceptable means to pay debts. Commodity money had value only to people who believed it had value.
Money is anything that serves as a medium of exchange. Other functions of money are to serve as a unit of account and as a store of value. Money may or may not have intrinsic value. Commodity money has intrinsic value because it has other uses besides being a medium of exchange.
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.
Representative money is a portable currency that is backed by a physical commodity such as a bank deposit. Various forms of representative money are still in place, including checks and credit cards. These forms of payment are used today in place of paper money.
Representative money is a type of money that is issued by the government and backed by commodities such as precious metals like gold or silver. Commodity money is a medium of exchange with intrinsic value due to its use for purposes other than money. Examples of this include gold and silver.
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.
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.
Representative money and credit money are more efficient than commodity money because they are superior media of exchange and units of account.
What is a commodity money in simple terms?
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.
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. Commodity money gave way to the next stage-representative 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.
Why is representative money more useful than commodity money? Representative money is portable, durable, divisible and acceptable.
Most currencies are no longer backed by commodities. But there are still other forms of representative money, such as checks, money orders, and bank drafts. They can be exchanged for the value listed on the instrument.
One problem with representative money is that its value fluctuates with the supply and price of gold or silver, which can cause problems of inflation or deflation (a sustained rise or fall in the general level of prices).
However, commodity money also has its disadvantages. One disadvantage is that the value of the commodity can be volatile, which can lead to fluctuations in the value of the currency. Another disadvantage is that it can be difficult to transport and store, especially in large quantities.
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.
Credit money is the creation of monetary value through the establishment of future claims, obligations, or debts. These claims or debts can be transferred to other parties in exchange for the value embodied in these claims.
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 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.
Gold coins are the best example of commodity money. Commodity money is an asset that is backed by a specific commodity.
A representative example is a term used in UK financial advertising regulations that aim to show consumers the typical costs associated with a product being advertised. The representative example must be provided when any financial services provider advertising a product, whether it is a credit card, loan or mortgage.
The value of fiat money depends on supply and demand and was introduced as an alternative to commodity money and representative money. Commodity money is created from precious metals such as gold and silver, while representative money represents a claim on a commodity that can be redeemed.
A representative sample is a sample from a larger group that accurately represents the characteristics of a larger population. It's known as a representative sample because the answers obtained from it accurately reflect the results you would achieve by interviewing the entire population.
