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Question
Which of the following is/are the primary function(s) of commodity money?
Which of the following is/are the primary function(s) of commodity money?
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Solution
The correct option is C measure of value
The direct exchange of goods or the barter system suffered certain drawbacks. So, an intermediary was used for trading. Thus, money was used. Money was not always currency. Often a commonly accepted commodity acted as the intermediate medium that facilitated the exchange of commodities. Since a commodity acted as money, it was referred to as commodity money.
Instead of directly exchanging things they did not need, people could exchange it for a certain quantity of commodity money, like rice. That way, commodity money acts as a measure of value and a medium of exchange.
The direct exchange of goods or the barter system suffered certain drawbacks. So, an intermediary was used for trading. Thus, money was used. Money was not always currency. Often a commonly accepted commodity acted as the intermediate medium that facilitated the exchange of commodities. Since a commodity acted as money, it was referred to as commodity money.
Instead of directly exchanging things they did not need, people could exchange it for a certain quantity of commodity money, like rice. That way, commodity money acts as a measure of value and a medium of exchange.
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