What Is an Example of Representative Money?

What Is an Example of Representative Money?

An example of representative money is a paper check that is issued by a banking institution. The check is physically not money, but it is representative of and viewed in the same manner as money.

Representative money can be exchanged for various commodities, including silver and gold. For instance, in the 1700s, tobacco notes issued by different states could be converted to tobacco when desired. The paper representative of the commodity is generally easier to carry and can be exchanged on demand.

In the 18th and 19th centuries, states did a poor job of overseeing the issuance of representative money. This led to the federal government taking over the entire process.