Modern paper money is fiat money because it is backed only by the faith the holder has in the government that issued it.

Question

Quizplus · Accepted Answer

Modern paper money is not backed by a physical commodity such as gold or silver, but by the government that issued it. Its value is based on people's belief in the government's ability to maintain price stability and ensure the money's acceptance as a medium of exchange. This is the characteristic of fiat money.

Modern Paper Money Is Fiat Money Because It Is Backed