The major problem of a currency that is fractionally backed and convertible into a precious metal is that of

Question

Quizplus · Accepted Answer

Maintaining the convertibility of the currency into the precious metal can be difficult, as fluctuations in the value of the metal can lead to shortages of the metal and difficulties in redeeming the currency for the metal. This can lead to a loss of confidence in the currency and ultimately its devaluation.

The Major Problem of a Currency That Is Fractionally Backed