2. The kinds of money Aa Aa Personal possession of currency is prohibited in U.S

Question

2. The kinds of money Aa Aa Personal possession of currency is prohibited in U.S. prisons, although, in practice, prisoners still exchange goods and services. Until 2003, the year in which the U.S. government banned smoking in federal penitentiaries, cigarettes were the preferred medium of exchange among prisoners. Outside of U.S. prisons, people use the U.S. dollar for day-to-day transactions. One important difference between using cigarettes and using dollars as money is that have intrinsic value. U.S. dollars are an example of money Suppose that an innovative and respected prisoner comes up with the idea that, instead of using cigarettes directly as money, he will accept deposits of cigarettes and issue depositors unique, but intrinsically worthless, tokens that they can exchange at any time allowed by the guards for a fixed quantity of cigarettes. By performing this service for a small fee, the innovative prisoner keeps the deposits secure from theft, and the depositors benefit because they can more easily transact with and securely hide their tokens than they would with their cigarettes. The innovative prisoner has created a currency system for prisoners to use the tokens as money commodity-backed commodity

Explanation / Answer

Ciggarettes have intrinsic value. It means they have the value of their own.

U.S dollars is an example of fiat money. It is paper money used for transactions.

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