What is 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. An item has intrinsic value if it still has value even if it is not used as money.
What is representative money and give example?
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 paper money in economics?
Representative paper money: Representative paper money is the paper money which is fully backed by gold and silver reserves. Under the monetary system of representative money, the quantity of gold and silver which is equal to the value of paper currency issued are kept in the reserves by the monetary authority.
Which of the following is an example of representative money?
An example of representative money is a cheque. Representative money is a medium of exchange, printed on paper that represents something of value, but doesn’t have its value of any kind. A cheque is representative money as it represents the value of money and is printed on paper but does not have its value.
When did representative money start?
On March 10, 1862, the first United States paper money was issued. The denominations at the time were $5, $10, and $20 and became legal tender on March 17, 1862. The inclusion of the motto “In God We Trust” on all currency was required by law in 1955.
What does the form of money supply mean?
The money supply is the total amount of money—cash, coins, and balances in bank accounts—in circulation. For example, U.S. currency and balances held in checking accounts and savings accounts are included in many measures of the money supply.
What is fiat Crypto?
The term fiat currency is commonly used to distinguish regular money from cryptocurrency, a digital payment form that can exist without a central bank.
What are the advantages of representative money?
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.
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.
What is the main source of money supply in an economy?
The central banks of all countries are empowered to issue currency and, therefore, the central bank is the primary source of money supply in all countries. In effect, high powered money issued by monetary authorities is the source of all other forms of money.
What are the main components of money supply?
COMPONENTS OF MONEY SUPPLY: There are two main components of money supply, currency (or fiat money) and demand deposits.
What is the difference between money and representative money?
Money is an asset in an economy that people use regularly to purchase goods and services from other people. 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,…
What does the service-based economy mean for small businesses?
The emergence of a service-based economy presents opportunities to small businesses, many of which are service providers. from an agrarian or resource-based economy towards higher productive agriculture and a sophisticated industrial or service-based economy.
What is the difference between fiat money and representative money?
Whereas fiat money has no intrinsic value in itself and it only has value because of the government and commodity money only has value in virtue of itself or its potential uses, representative money signifies a “claim” to some specific commodity that has intrinsic value.
What are the advantages of representative money over commodity 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.