In explaining the evolution of money, ________.
A) government regulation is the most important factor
B) commodity money, because it is valued more highly, tends to drive out paper money
C) new forms of money evolve to lower transaction costs
D) paper money is always backed by gold and therefore more desirable than cheques

Question

Quizplus · Accepted Answer

Historically, new forms of money have evolved to lower transaction costs, such as the shift from barter to commodity money, and from commodity money to paper money. Government regulation has played a role in the evolution of money, but it is not the most important factor. Commodity money may drive out paper money in some instances, but it is not a universal trend. Paper money is not always backed by gold, and cheques are not always backed by paper money.

In Explaining the Evolution of Money, ________