Question

which of the following provides the best explanation of why money is valuable? group of answer choices money is valuable because it is indivisible. money is valuable because it is scarce. money is valuable because it is backed by precious metals, primarily gold and silver. money is valuable because it has intrinsic value, independent of its use as a means of exchange.

Answer 1

Money is valuable primarily as a medium of exchange and a store of value in an economy. Commodity money like gold has intrinsic value, whereas modern fiat money's value comes from government trust. The ability to store value over time is a crucial attribute of money.

Step-by-step explanation:

The value of money primarily comes from its function as a medium of exchange, a unit of account, a store of value, and a standard of deferred payment. While commodity money like gold and salt have an intrinsic value due to their utility in other uses, the modern fiat money does not possess intrinsic value but is valuable because of the trust and credibility it holds within an economy. Fiat money's value is largely derived from government regulation and law, not from physical or intrinsic assets it is backed by.

Historically, some forms of money, such as gold and silver, were valued for their use in other markets, including electronics, aerospace, jewelry, and even architecture. This commodity money had both the characteristics of being a medium of exchange and having intrinsic value. However, most currencies today are fiat money, backed not by commodities but by the stability and legal structures of governments.

Furthermore, money must serve as a store of value, which allows individuals to defer spending and know that their money will maintain value over time, despite potential inflation or other economic variables.