Question

Classify each example as commodity money or fiat money.

- salt
- copper
- cattle
- Mexican pesos
- Bitcoin

Answer 1

Salt, copper, and cattle are examples of commodity money, while Mexican pesos and Bitcoin are examples of fiat money.

Step-by-step explanation:

Commodity Money:

• Salt - Commodity money because it has intrinsic value in other uses and was historically used as money.
• Copper - Commodity money because it has intrinsic value in other uses, such as conducting electricity.
• Cattle - Commodity money because they have value for purposes other than money, such as providing meat, milk, and hides.

Fiat Money:

• Mexican pesos - Fiat money because its value is not based on any physical commodity, but is determined by the government.
• Bitcoin - Fiat money because it is not backed by any physical commodity and its value is determined by supply and demand in the market.

Answer 2

Commodity money
- salt
- copper
- cattle

Fiat money
- Bitcoin
- Mexican pesos

Step-by-step explanation:

Fiat money, unlike commodity money, has no other use except as a medium of exchange. Bitcoins and Mexican pesos are only valuable because people will accept them as currency. Since fiat money is easier to reproduce in large quantities than precious metals or animals, it is more prone to both counterfeiting and overproduction.

Commodity money is a good used as money that also has intrinsic value independent of its use as money. A famous example is the use of cigarettes as money in prisoner‑of‑war camps. Copper can be used in industrial applications as well as for money. Cattle and salt historically have been valuable items in and of themselves.