What is the most important factor for Federal Reserve currency to be accepted as money?
A)Its acceptance by businesses and households in the United States in exchange for goods and services
B)Its designation as legal tender by the federal government
C)The willingness of the federal government to accept it in exchange for an equivalent amount of gold or silver coins
D)The willingness of foreign businesses and banks to accept it in exchange for goods and services

Question

Quizplus · Accepted Answer

The most important factor for Federal Reserve currency to be accepted as money is its acceptance by businesses and households in the United States in exchange for goods and services. If people and businesses do not have confidence in the value and acceptability of the currency, it will not be widely used as a medium of exchange. Legal tender designation and the willingness of foreign businesses and banks to accept it are also important, but without widespread domestic acceptance, its value as money would be greatly diminished. The willingness of the federal government to accept it in exchange for gold or silver coins is no longer a relevant factor, as the US abandoned the gold standard in 1971.

What Is the Most Important Factor for Federal Reserve Currency