Final answer:
Commodity money is currency made of a valuable commodity, such as gold or silver, while fiat money is currency that has no intrinsic value but is declared by a government to be legal tender. Commodity money has value from its commodity form, while fiat money has value based on trust and faith in the government.
Step-by-step explanation:
Commodity Money:
Commodity money is a type of currency that has intrinsic value because it is made of a valuable commodity, such as gold or silver.
Commodity money has value not only as a medium of exchange but also because the commodity itself has value in other uses, such as in industries or for making jewelry.
Fiat Money:
Fiat money is a type of currency that does not have intrinsic value. It is declared by a government to be legal tender and is accepted as a medium of exchange because people have faith and trust in its value.
Fiat money is not backed by a commodity or any physical asset but is based on the government's decree and the trust of the people who use it.