What is fiat money?

A. an asset that has the ability to be easily converted into the medium of exchange

B. money that has value independent of its use as money

C. money issued by financial intermediaries, such as banks, but not the central bank

D. money that is authorized by a central bank and that does not have to be exchanged for gold or some other commodity money

Question

Business

Abby Newman

8 October, 06:44

What is fiat money?

A. an asset that has the ability to be easily converted into the medium of exchange

B. money that has value independent of its use as money

C. money issued by financial intermediaries, such as banks, but not the central bank

D. money that is authorized by a central bank and that does not have to be exchanged for gold or some other commodity money

+4

Answers (1)

Know the Answer?

Karly Cabrera · Answer 1

D. money that is authorized by a central bank and that does not have to be exchanged for gold or some other commodity money

Explanation:

By definition, fiat money is a physical money that is made a legal tender by the government or other authoritative figure.

It is not backed by any physical commodity like silver or gold but only by the government that distributed it. Additionally, if inflation occurs in a country that uses fiat money as a legal tender, the owners will go at a huge loss since it cannot be redeemed and in worst case scenario such as hyperinflation, it will be worthless.