Explanation a. Bottles of rum used to pay for goods. It is commodity money. In the given case, rum is a commodity and it can be used to make different other commodities and those commodities can be valued by their own value. Therefore the bottle of rum will be treated as commodity money. b. Salt used as medium of exchange. It is commodity money. In the given case, salt is a commodity and it can be used to make various eatables and those eatables can be valued by their own value Therefore, salt will be treated as commodity money...

Commodity Money: The value of that particular currency is related to the commodity of which that currency is made like gold coins, silver coins, or it can be said that the value of the currency is same as the value of the commodity of which the currency is made of. Commodity-basket Money: The value of that particular currency is measured in terms of one particular commodity like the value of paper currency is measured in terms of gold. Fiat Money: The value of that particular currency is related to the demand and supply of that currency and it is not related to the material of which the currency is made up of. This money is treated as legal tender by the government. To identify: The type of money used in each situation.

Macroeconomics

5th Edition

ISBN: 9781319098759

Author: Paul Krugman, Robin Wells

Publisher: Worth Publishers

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Required Reserve and Excess Reserve Analysis

A required reserve is an amount of cash that banks must keep with themselves, which is certain percentage of the deposits made by their customers. Required reserve is a percentage of the bank's deposits that the respective bank must have on each overnigh…

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Chapter 14, Problem 2P

To determine

Concept Introduction:

Commodity Money:

The value of that particular currency is related to the commodity of which that currency is made like gold coins, silver coins, or it can be said that the value of the currency is same as the value of the commodity of which the currency is made of.

Commodity-basket Money:

The value of that particular currency is measured in terms of one particular commodity like the value of paper currency is measured in terms of gold.

Fiat Money:

The value of that particular currency is related to the demand and supply of that currency and it is not related to the material of which the currency is made up of. This money is treated as legal tender by the government.

To identify: The type of money used in each situation.

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