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.
What was the problem with representative money?
Less government control In a representative money system, because the value of money is tied directly to some specific object, the government has less control over the creation of money and currency. Governments could not just print more money than the gold reserves they have.
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 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). Any type of money that has face value greater than its value as material substance.
What is another name for representative money?
commodity-backed money
The term representative money has been used variously to mean: A claim on a commodity, for example gold certificates or silver certificates. In this sense it may be called “commodity-backed money”.
What is true of representative money?
its changing value relative to other currencies. What is true of representative money? It was once the most common form of money.
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 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.
Which of the following is an example of representative money *?
A check is an example of representative money.
What is the difference between representative money and commodity money?
Commodity money is an item used for money that has intrinsic value. 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.
What is the difference between standard money and representative money?
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.
Which is the best definition of representative money?
Definition of representative money : paper money backed by an equal amount of gold or silver coin or bullion held by a government
What are the advantages and disadvantages 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.
How is the supply of representative money limited?
Representative money is limited by the supply of the commodity for which it can be redeemed. In other words, the government should only issue the amount of representative money that it has the ability to convert to the commodity the money is based upon.
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.