Which of the following is the best description of fiat money?Group of answer choicesCheque accounts and debit cards.Coins made of gold and silver.Paper money that can be redeemed for gold or silver.Legal tender that has no intrinsic value.
Question
Which of the following is the best description of fiat money?Group of answer choicesCheque accounts and debit cards.Coins made of gold and silver.Paper money that can be redeemed for gold or silver.Legal tender that has no intrinsic value.
Solution
The best description of fiat money is "Legal tender that has no intrinsic value."
Fiat money is a type of currency that a government has declared to be legal tender, but it is not backed by a physical commodity like gold or silver. The value of fiat money is derived from the relationship between supply and demand and the stability of the issuing government, rather than the value of a commodity backing it. It's value is essentially based on the trust and confidence people have in the value of that money.
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