What advantages does fiat money have over representative money?

What advantages does fiat money have over representative money?

Both fiat and representative money are backed by something. Without any backing, they would be completely worthless. Fiat money is backed by the government, while representative money can be backed by different assets or financial instruments. For example, a personal check is backed by the money in a bank account.

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 are some examples of representative money?

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 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 are the advantages and disadvantages 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.

What is the best form of money?

Over the last millennium, precious metals – primarily gold and silver – have evolved into the best form of money in existence. “These are the reasons why gold is the best money.

When did Representative money start?

Legal tender laws now make it illegal to refuse legal currency in favor of some other form of payment. The first paper money issued in the United States occurred on March 10, 1862. The $5, $10, and $20 bills issued were made legal tender by an act of Congress on March 17, 1862.

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