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Commodity money and fiat money

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Dear OTA: Could you please answer the following questions on monetary policy to better help me understand economics.
Thank you very much!

Question 1:
Describe the differences between commodity money and fiat money, making sure to explain what makes fiat money work.

Question 2:
Define and explain the money multiplier. Identify the change to the money supply in the following situation: The required reserve ratio is 12.5 percent and the Fed increases the monetary base by $100.

Question 3:
Describe the monetary policy tools the Fed can use to affect the monetary base.

Question 4:
Compare and contrast expansionary and contractionary monetary policies.

Question 5:
Identify and describe the means by which the Fed can affect the money multiplier. How do changes in policy carry through to the economy?

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Solution Preview

Please refer to the attachment.

monetary policy
Dear OTA: Could you please answer the following questions on monetary policy to better help me understand economics.
Thank you very much!!!!
Credit Value: 11 Deadline: March 17, 2008, 9:45 pm

Question 1:
Describe the differences between commodity money and fiat money, making sure to explain what makes fiat money work.

Commodity money is money whose value comes from a commodity out of which it is made. Examples of commodities that have been used as mediums of exchange include gold, silver, copper... etc.
Fiat money is the currency that a government has declared to be legal tender, despite the fact that it has no intrinsic value and is not backed by reserves. Fiat money is based solely on faith. Most of the world's paper money is fiat money. Because fiat money is not linked to physical reserves, it risks becoming worthless due to hyperinflation. If people lose faith in a nation's paper currency, the money will no longer hold any value.
Therefore, the major differences between commodity money and fiat money is that the former has a material value, and the latter has no material value.

Question 2:
Define and ...

Solution Summary

The expert describes the differences between commodity money and fiat money, making sure to explain what makes fiat money work. Money multipliers are defined.

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