The value of money is fundamentally determined by the
A)reputation of the bank that holds it
B)reputation of the person who holds it
C)gold or silver for which it can be redeemed
D)value of the commodities for which it can be traded
E)value of comparable stocks and bonds

Question

Quizplus · Accepted Answer

The value of money is fundamentally determined by the value of the commodities for which it can be traded. In other words, the purchasing power of money is based on the goods and services it can buy. This is why inflation occurs when there is too much money in circulation chasing too few goods, as the value of money decreases relative to the goods available for purchase. Gold or silver used to be the basis for determining the value of money, but this is no longer the case in most modern economies. The reputation of the bank or person holding the money is not directly relevant to its value. The value of comparable stocks and bonds is not necessarily linked to the value of money.

The Value of Money Is Fundamentally Determined by the