Question

Which of the following situations represents commodity-backed money? Choose one:

A. Dollars are printed on paper and have value because the government says they have value.
B. Checks are printed on paper and can be cashed in for printed currency.
C. Coins are minted with a type of metal that has little to no intrinsic value.
D. Dollars are printed on paper and have value because they can be converted at a fixed rate into a valuable commodity.
E. Coins are minted with gold and have a value based on the amount of gold the coin contains.

Answer 1

Answer: A. Dollars are printed on paper and have value because the government says they have value.

Explanation: Commodity backed money is a situation where by the value of money is backed up by its purchasing power with which it can be traded with at request. The supply of many can not be more than the purchasing power the country holds.