Chapter 23, Problem 3CYU

To determine

The reason for making more efficient use of resources by using commodity backed money instead of commodity money.

Explanation of Solution

Commodity money refers to the money in the form of commodities that can be used for making transactions. Its value is derived from its intrinsic value.

Commodity backed money refers to the money which uses the value of commodities instead of commodities for making transactions. That’s why resources used in commodity backed money are more efficient as actual committees are not transferred instead its value is used for transaction purpose.

Economics Concept Introduction

Money: Money is the medium of exchange through which goods and services can be traded. It can perform three main functions i.e. medium of exchange, store of value and unit of account.