Question

Consider the following statements:
1) Good money is money that shows little difference between its face value of the coin and its commodity value.
2) Bad money is money that has a commodity value considerably less than its face value.
Which of the statements given above is/are correct?

• A. Only 1
• B. Only 2
• C. Both 1 and 2
• D. Neither 1 nor 2

Answer 1

The correct option is C Both 1 and 2

Good money refers to a currency whose face value is backed by its intrinsic value (eg. gold). Bad money, like the modern day currencies, don't have an intrinsic value anywhere close to the face value and are only valued because they are backed by the national Govts and accepted as legal tender.