Chapter 23, Problem 6MCQ

To determine

The correct option that is the type of money if salt is used as money.

Answer to Problem 6MCQ

Option b is correct.

Explanation of Solution

Explanation for correct option:

b.

During historic time, salt was referred as money which has its own intrinsic value. Commodity money may include salt, sea shells, tea, coffee, silver, gold, etc. Therefore, option b is correct.

Explanation for incorrect options:

a.

Fiat money refers to the money that possesses its value from official status. Therefore, option a is incorrect.

c.

Commodity backed money refers to the currency that can be exchanged with some commodity on request or demand. Therefore, option c is incorrect.

d.

Monetary aggregate refers to the overall measure of monetary supply. Therefore, option d is incorrect.

e.

Near-money refers to the less liquid asset that can be converted into cash quickly. Therefore, option e is incorrect.

Economics Concept Introduction

Money: Money is the medium of exchange through which goods and services can be traded. It can perform three main functions i.e. medium of exchange, store of value and unit of account.

Commodity Money: Commodity money refers to the physical goods those posses its own intrinsic value. It can be salt, tea, sea shells, precious metals, etc.