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What is commodity money?
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Define money and discuss its three basic functions. Distinguish between commodity money and fiat money, giving examples of each. Define what is meant by the money supply and tell what is included in the Federal Reserve System’s two definitions of it (M1 and M2).
Nov 21, 2023 · 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...
- Commodity Money Definition
- Origins of Commodity Money
- Commodity Money Examples
- Characteristics of Commodity Money
- Trust in Commodity Money
Commodity money is a physical good that consumers universally use to trade for other goods. In other words, it is like the money we use today, but has an actual value. For example, gold was used as money, but also in the manufacturing of jewellery. So it had value outside its use as a medium of exchange. In economics, this is known as ‘intrinsic va...
The history of commodity money extends beyond centuries and millennia. In fact, its origins are virtually impossible to accurately determine. Nevertheless, there are records that indicate activity during the period 700-500BC when gold became a common form of money.
Not all commodity money is made the same. Many have been tried and failed due to a number of factors, but here are a list of some commodity monies that have been used through history: Some examples of Commodity money include: 1. Alcohol In various cultures and throughout different time periods, alcohol has been used as a form of commodity money. Th...
We have already seen what commodity money is and why people trust it, but let’s dive in and see what are the characteristics of commodity money.
In economic terms, commodity money has what is known as an ‘intrinsic value’. This means that it has a value outside of its use as money. Therefore, anything that has an alternate use could be considered a commodity form of money. The ‘intrinsic value’ of commodity is a crucial part of building its trust. We can look back many centuries to when goo...
Oct 27, 2023 · Commodity money is a form of money that derives an intrinsic value from its underlying commodity and the supply and demand dynamics. Gold and silver have been accepted as commodity money...
What is Commodity Money? The most basic definition of money is that: ‘anything which acts as money, is money’. In other words, anything that is widely accepted as a medium of exchange to facilitate trade, can be called money. However, this is not an ideal classification as there are several other functions of money.
Jan 17, 2023 · Key Highlights. Commodity money refers to a physical item such as gold or silver, that possesses intrinsic value, whereby its value transcends means of exchange. Because it is no longer backed by gold, the U.S. dollar has no intrinsic value, which can make it more vulnerable than commodity money during economic turmoil.
Apr 23, 2024 · What is Commodity Money? Commodity money is that has value because it is made of a particular commodity that has value itself. In other words, commodity money is the same a valuable object (an object with intrinsic value) in addition to the value it has in an exchange.
