ECONOMICS
FINANCIAL MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Money that has value because the government says so.
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Money that is backed by silver or gold.
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It have value because the item is worth something.
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None of the above
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Detailed explanation-1: -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-2: -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.
Detailed explanation-3: -Commodity value of money refers to value of the commodity (like metal) that the money is made of. Thus, if coins are made of gold or silver (as was the practice in old days), commodity value of money refers to the market value of the gold or silver contained in the coin.
Detailed explanation-4: -Commodity Money: Commodity money is that money whose face value is equal to its commodity value. In other words, face value of the money like coin was equal to its intrinsic (commodity) value. It is also known as full-bodied money.
Detailed explanation-5: -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.