What is representative money in economics?
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.
What is representative money and give example?
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.
Which of the following is a representative money?
Representative money is an item such as a token or piece of paper that has no intrinsic value but can be exchanged on demand for a commodity that does have intrinsic value, such as gold, silver, copper, and even tobacco.
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 characteristic of representative money?
Representative money is any medium of exchange, often printed on paper, that represents something of value, but has little or no value of its own (intrinsic value).
What are the advantages of representative money?
One advantage of representative over commodity money is that it is easier to use and transport. Instead of hauling around your physical goods, you can instead have a wallet of banknotes that represent some portion of your store of goods.
Why is representative money important?
Because representative money is tied to a physical object, it is less prone to depreciation by inflation. With a representative money system, the government cannot just print as much money as they want. The amount of money they can print is limited by the amount of the commodity they have.
What is specie is it a form of commodity money or representative money?
Eventually governments officially converted commodity money to representative money in the form of paper currency. This was essentially a promise that the printed note could be redeemed for a certain amount of gold or silver coin—called specie.
What type of economy is moneyless?
A moneyless economy or non-monetary economy is a system for the allocation of goods and services as well as for the assignment of work without payment of money. The simplest example is the family household, which can be a system of obligations nevertheless.
Why is representative money more useful than commodity money?
Why is representative money more useful than commodity money? Representative money is portable, durable, divisible, and acceptable. A money market mutual fund has slightly greater risk than a savings account.
What is representative money quizlet?
Representative money is an item such as a token or piece of paper that has no intrinsic value, but can be exchanged on demand for a commodity that does have intrinsic value, such as gold, silver, copper, and even tobacco.
What is representative full bodied money?
(ii) Representative Full bodied money – It refers to money which is usually made of paper. The value of representative full-bodied money is much higher than its value as a commodity. It is accepted as money as it can be conveniently used for carrying out transactions.
What does it mean to have representative money?
Representative money consists of tokens or paper that have no intrinsic value; however, the holder of paper money has the right to demand that the paper money be converted to an underlying commodity upon which the value of the money is based. Representative money makes it easier to carry money and make large purchases.
What’s the difference between representative money and fiat money?
Fiat vs. Representative Money: An Overview 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. Both fiat and representative money are backed by something. Without any backing, they would be completely worthless.
What are the advantages of a representative money system?
Because representative money is tied to a physical object, it is less prone to depreciation by inflation. With a representative money system, the government cannot just print as much money as they want. The amount of money they can print is limited by the amount of the commodity they have.
Where did the idea of representative money come from?
The first explicit evidence of representative money dates back to ancient China in which commodity warehouses issued certificates of deposit, guaranteeing the holder to a portion of the goods stored in the warehouse. Things like land titles, wills, and bank checks all count as kinds of representative money.