What Are The Examples Of Representative Money?
In this article, we will make you aware of some important examples of representative money and also explain them to you. I guarantee that you may never think about the examples of representative money. Because the concept of money has developed over time. A thousand years ago, currency was based on gold or silver coins. There are different types of money today, including fiat money and representative money. Before understanding representative money, you should know what money is. Well, money is a tool that we use as a medium of exchange to represent the transfer of value that can be used to buy goods and services. Let’s have a look at some examples of representative money.
What Is The Representative Money?
Representative money is also called paper money, which is a form of money or currency that represents the intent to pay. The most widely used representative money is a basic cheque. Apart from the basic cheques, there are a few other types of representative money including credit cards, money orders, and bank drafts.
Well, the cheque itself is not money, it simply represents a transfer of value that has still not occurred. This means that the person who issued the check to you will pay you the amount offered when you present the check to a financial institution that can change it for fiat money. Give examples of commodity money, representative money, and fiat money. So, commodity money examples are gold and silver certificates, examples of representative money are cheques, and fiat money example is the pound sterling, the euro, and the US Dollar.
Let’s have five examples of representative money.
What Are The Examples Of Representative Money?
Here is a list of some important and commonly used examples of representative money.
- Credit Cards
Examples Of Representative Money
There are more than 3 uses of money and examples of representative. Well, here we have explained about 5 examples of representative money in detail.
1. Credit Cards
One of the best examples of representative money in economics is credit cards and it is vastly used in the modern-day economy. Because it extends individuals’ purchasing power significantly. Most middle-class families or citizens today can not even afford to buy a car with cash anymore, so they enhance their purchasing power via credit. Many assets like businesses, real estate, and capital are bought using credit nowadays.
Cheque is also an example of representative money and it is a document you can issue to your bank, directing it to pay the specified sum mentioned in digits as well as to the person whose name is borne on the cheque. Cheques are also called negotiable instruments. It can be issued for a current account or the savings account and can be used to deposit payment amounts to other people through the bank account. Why did cheques call representative money? Because a cheque is nothing but paper and not actual money, which means it represents money or an amount.
Another example of representative currency is the gold currency which is also called gold coins. You can not use gold coins in your daily life as you are using paper currency. You do only savings or investments with them. Under the free market system, gold is a currency. Gold has a price, and that price will fluctuate relative to other forms of exchange, such as the United States Dollar, the Euro, and the Japanese Yen. Gold can be purchased and stored, but is generally not used directly as a form of payment.
You may find it difficult or funny by hearing the term tobacco, but yes, it is an example of representative money. Between the 15th and 18th centuries, tobacco notes were issued as a valuable means of exchange in the United States. The concept that gave tobacco notes value was the fact that they could be exchanged for real tobacco. The concept fell out of favor because it became so much easier to grow tobacco.
The final example of representative money is copper. The value of the computer as a commodity is based on the same principles. Banks store large amounts of copper in their vaults to back the currency they issue. Copper was also traditionally used to produce commodity money in the form of coins. If you have studied history, then you might be a header of copper coins. Now, the use of copper coins is prohibited because the value of copper itself is more than the value of that coin. That means a $1 copper coin requires copper amounts to $10.
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What Is An Example Of 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 Are The Examples Of Commodity Money And Representative Money?
Some examples of commodity money are salt, cattle, tobacco, corn, cotton, and precious stones. b. Representative money includes paper receipts for gold and silver, bills of credit, silver and gold certificates, and IOU notes.
What Are Four Examples Of Money?
The 4 different types of money as classified by the economists are commercial money, fiduciary money, fiat money, commodity money.
Is Salt An Example Of Commodity Money Or Representative Money?
Commodity money serves as currency and also has an intrinsic value. The ancient Chinese used tea, which has intrinsic value as a beverage, as money. Salt and tobacco are other examples of commodities once used as money. The United States currently does not use commodity money.
By reading this article, you have understood various terms and examples regarding representative money. Now, the most commonly used money in the market is paper currency, which is also called token currency. But there is also another form of currency trending now digital currency. In many countries, the government promotes digital currency to avoid illegal printing of currency and also they want to decrease the cost of currency printing. In digital currency, you don’t need to carry paper currency with you. Well, you have understood all the examples of representative money in a detailed manner.