What gives commodity money its value?

• A. Its intrinsic value as a good that can be used for purposes other than as money
• B. Its unlimited supply in the economy
• C. The fact that it cannot be exchanged for goods and services
• D. The government's declaration that it must be accepted as payment

Answer: (A)

Verified step by step guidance

1. Understand the concept of commodity money: Commodity money is a type of money that has value in itself, aside from its use as a medium of exchange. This means it has intrinsic value because it can be used for other purposes beyond just being money.
2. Identify what intrinsic value means: Intrinsic value refers to the usefulness or value of the commodity in its own right, such as gold being valuable for jewelry or silver for industrial uses, not just because it is used as money.
3. Contrast commodity money with fiat money: Fiat money has value primarily because the government declares it legal tender, not because it has intrinsic value. This helps clarify why government declaration alone does not give commodity money its value.
4. Consider the supply aspect: Unlimited supply would typically reduce value, so the value of commodity money is not due to unlimited supply but rather its scarcity and usefulness.
5. Conclude that the value of commodity money comes from its intrinsic value as a good that can be used for purposes other than as money, making it valuable even if it were not used as a medium of exchange.