Commodity money is also known as ___________.barter moneystandard moneylegal moneynear money (2024)

FAQs

What is commodity money also known as? ›

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.

In a direct barter economy, the goods one owns are exchanged for the goods one desires. In a commodity money economy, the goods one owns may be traded for a good that is not consumed but is traded, in turn, for the good one desires.

Commodity money involves the use of an actual good in place of money (gold coin, tobacco). Fiat money has no other value than as a medium for exchange; value comes from government (paper money).

We generically define a commodity standard as a system in which money is meaningfully denominated in units of a useful good (or set of goods). A piece of money may be "full-bodied" and materi- ally contain the money commodity, as a silver coin does under a silver stand- ard.

A commodity is a basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often used as inputs in the production of other goods or services.

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.

Bartering is the exchange of goods and services between two or more parties without the use of money. It is the oldest form of commerce. Individuals and companies barter goods and services between each other based on equivalent estimates of prices and goods.

Historically, examples of commodity money include gold, silver, tea, alcohol, and seashells. Even if no one would accept such goods as trade, the owners could still use them for their purposes.

Traditionally, commodities such as gold, silver, salt, shells, and other valuables used as commodity money, were chosen as currency because they possessed qualities like durability, divisibility, and scarcity. People recognized their inherent worth and accepted them in exchange for goods and services.

Commodity money has intrinsic value because it has other uses besides being a medium of exchange. Fiat money serves only as a medium of exchange, because its use as such is authorized by the government; it has no intrinsic value. The Fed reports several different measures of money, including M1 and M2.

What is money backed by commodity called? ›

Fiat money is both physical money and legal tender and is backed by a nation's government. Representative money may be backed by a physical commodity such as precious metals, the cash in the issuer's account, or the credit extended through a credit card company.

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.

Since payment by commodity generally provides a useful good, commodity money is similar to barter, but is distinguishable from it in having a single recognized unit of exchange.

The most common form of commodity money was dried indian corn, which was used to purchase the item depicted above and described below.

Fiat money is a government-issued currency that is not backed by a commodity such as gold. Fiat money gives central banks greater control over the economy because they can control how much money is printed. Most modern paper currencies, such as the U.S. dollar, are fiat currencies.

economics. Also known as: futures exchange, futures market.

A commodity currency is a currency that co-moves with the world prices of primary commodity products, due to these countries' heavy dependency on the export of certain raw materials for income. Commodity currencies are most prevalent in developing countries (eg. Burundi, Tanzania, Papua New Guinea).