What distinguishes commodity money from fiat money?
What will be an ideal response?
Commodity money, such as gold or silver, has value even if it is not used as money. For example, gold coins could be melted down and converted to jewelry. Fiat money, such as U.S. paper currency really has no value other than its use as money. Its value derives from the fact that it is deemed to be legal tender by the U.S. government and along with people's willingness to accept it.
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Most people would prefer to drive a luxury car that has all the options, but more people buy less expensive cars even though they could afford the luxury car because
A) luxury cars cost a lot more than non-luxury cars. B) the marginal utility per dollar spent on the less expensive car is higher than that spent on luxury cars. C) car buyers are irrational. D) the total utility of less expensive cars is greater than that of luxury cars.
Suppose households decide to reduce savings because they want to enjoy more present time than future time. In this case, the loanable funds model predicts that
A) interest rate goes down, and quantity of borrowed funds increases. B) interest rate goes down, and quantity of borrowed funds decreases. C) interest rate goes up, and quantity of borrowed funds decreases. D) interest rate goes up, and quantity of borrowed funds increases.