ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Early forms of money were often commodity money-money that had value because it was made of a substance that had value. Examples of commodity money are gold and silver coins.

Detailed explanation-2: -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.

Detailed explanation-3: -Gold coins are the best example of commodity money. 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.

Detailed explanation-4: -Fiat money is backed by a country’s government instead of a physical commodity or financial instrument. This means most coin and paper currencies that are used throughout the world are fiat money. This includes the U.S. dollar, the British pound, the Indian rupee, and the euro.