Question

What is the difference between commodity money and fiat monay?

Answer 1

Fiat Money- A form of money which is a legal tender but doesn’t have any intrinsic value. For example: Paper Currency. Without the numerical Value written over it, it’s a mere piece of paper. It cannot be traded for anything.

Commodity Money- A form of money which is a legal tender and has some intrinsic value. For example: Gold, silver.

....

Commodity money's value is based on the material it was manufactured with, such as gold or silver. Fiat money, therefore, does not have intrinsic value, while commodity money does. Changes in public confidence in a government issuing fiat money may be enough to make the fiat currency worthless.