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It is important for you to understand the different terms that mentors explain. To understand the subject as well as services, you need to go through the following points carefully.
What do you mean by the commodity money?
Commodity money is the medium, which is valuable and used in exchanging objects or things. These objects are also valuable and cannot be provided without exchanging of any other valuable things. Exchange of commodities take place in silver, gold, salt, market, barley, cocoa, copper, tea, peppercorns and many other things.
An exact example of commodity money
If there are two persons A and B, and A exchanges 5 kg rice with a wooden chair that belongs to B. Now, A provides the commodity money to B and B has the commodity money which is a Chair.
In these days, exchange is always done with some particular value and it must be common to improve the economy of the country. So, money is an exact thing that comes under commodity money.
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What are the different types of money?
You must understand that money can be classified into three different categories and these are –
- Full bodied money
- Representative money
- Credit Money
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How Fiat money and commodity money are different?
Fiat money means the particular valuation of exchange declared by the government. In this case, currency or paper note is applicable. However, in case of commodity value, you can exchange the things either with money or by any other ways which is just a trust between a payee and a payer. Commodity money is a part of fiduciary money.
It means a person can purchase any asset and pay the value to the opposite party with a cheque. So, cheques are part of fiduciary money.
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