ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -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-2: -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.

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: -Tobacco, gold, and silver are examples of commodity money.

Detailed explanation-5: -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.