Fiat money is physical money—both paper money and coins—while representative money is a form of currency that represents the intent to pay, such as a check. ... Fiat money is backed by the government , while representative money can be backed by different assets or financial instruments.
Which best explains the difference between fiat money and commodity money?
Which of the following best explains the difference between commodity money and fiat money? Fiat money has no value except as money , whereas commodity money has value independent of its use as money. Open market operation.
What is the difference between commodity money and representative money?
What is the difference between commodity money and representative money? ... Commodity money consists of objects that have value in and of themselves, but representative money makes use of objects because the holder can exchange them for something else of value.
What is the difference between representative money and fiat money quizlet?
the difference is fiat money is physical money (paper money and coins) backed up by the government , representatives money is something that represents intent to pay the money such as a check,backed up by many different things, and the commodity money is based on material it was manufactured with such as gold or silver.
What is one difference between fiat money and commodity money group of answer choices fiat money has a higher intrinsic value than commodity money fiat money allows an economy to easily expand the money supply whereas it is more difficult to expand the supply?
Fiat money has a higher intrinsic value than commodity money. Fiat money allows an economy to easily expand the money supply, whereas it is more difficult to expand the supply of commodity money. Fiat money resolves the double coincidence of wants, whereas commodity money does not.
What are the 3 types of money?
- Physical money. Physical money, meaning cash and coins, is created by the US Treasury. ...
- Central bank reserves. Central bank reserves are a type of electronic money, created by the Federal Reserve and used by banks to make payments between themselves. ...
- Commercial bank money.
What’s an example of representative money?
Representative money includes things like token coins, paper money and different forms of certificates representing commodities. They have no value of its own and it is not made from the commodity it represents. Gold and silver certificates are two examples of representative money.
What are the qualifications for something to be used as money?
The characteristics of money are durability, portability, divisibility, uniformity, limited supply, and acceptability .
Which of the following is the best example of commodity money?
A commodity money is a physical good that has ‘intrinsic value’ – a use outside of its use as money. Historic examples include alcohol, cocoa beans, copper, gold, silver, salt, sea shells, tea, and tobacco . There are four main characteristics of commodity money – it’s durable, divisible, easily exchangeable, and rare.
Which most accurately explains why fiat money has value?
Which most accurately explains why fiat money differs from commodity money? ... Fiat money has value because it is a precious metal such as gold. Fiat money only has value as a medium of exchange . Fiat money has value because it enables the barter system to work.
What condition is necessary for a fiat money system to work?
What condition is necessary for a fiat money system to work? The money supply must be controlled (in US the Federal Reserve controls it) . Government must accept it.
Who is supplier of money?
The government and the banking system of a country are suppliers of money or are the producers of money. Hence, money held by them is not a part of the stock of money held by the people.
What happens during a bank run?
A bank run occurs when a large number of customers of a bank or other financial institution withdraw their deposits simultaneously over concerns of the bank’s solvency . As more people withdraw their funds, the probability of default increases, prompting more people to withdraw their deposits.
Why is fiat money bad?
Fiat money gives central banks greater control over the economy because they can control how much money is printed. ... One danger of fiat money is that governments will print too much of it , resulting in hyperinflation.
What is the simple money multiplier formula?
The formula for the money multiplier is simply 1/r, where r = the reserve ratio . A little too easy, right? It’s the reciprocal of the reserve ratio. When r is the reserve ratio for all banks in an economy, then each dollar of reserves creates 1/r dollars of money in the money supply.
What is fiat money backed by?
Fiat money is a form of currency that is declared legal tender. This includes money in circulation such as paper money or coins. Fiat money is backed by a country’s government instead of a physical commodity or financial instrument.
