ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Commodity money is to be distinguished from representative money, which is a certificate or token which can be exchanged for the underlying commodity, but only by a formal process.

Detailed explanation-2: -Representative money is a certificate or token that can be exchanged for the underlying commodity. For example, instead of carrying the gold commodity money with you, the gold might have been kept in a bank vault and you might carry a paper certificate that represents-or was “backed"-by the gold in the vault.

Detailed explanation-3: -More specifically, the term representative money has been used variously to mean: A claim on a commodity, for example gold and silver certificates. In this sense it may be called “commodity-backed money". Any type of money that has face value greater than its value as material substance.

Detailed explanation-4: -The 4 different types of money as classified by the economists are commercial money, fiduciary money, fiat money, commodity money. Money whose value comes from a commodity of which it is made is known as commodity money.

Detailed explanation-5: -A fiat money is a type of currency that is declared legal tender by a government but has no intrinsic or fixed value and is not backed by any tangible asset, such as gold or silver.