Recall the Application about the Brazilian city of Silva Jardim that has issued its own local currency to answer the following question(s). In order to entice local residents to spend their money on stores in town, the small city of Silva Jardim in Brazil, hatched a plan for its own currency. The currency is called the capivari and features a picture of a local rodent on the bills. The capivaris are issued by a local bank, which holds one unit of official Brazilian currency for each capivari it issued. Local merchants, however, give discounts for paying in capivaris so that local residents are therefore encouraged to make local purchases.
-According to this Application, the small city of Silva Jardim in Brazil has issued its own currency called the capivari. If this currency had nothing backing its value and was simply created by decree of the issuing city government, the city-issued money would be considered
A) commodity money.
B) fiat money.
C) barter money.
D) gold standard money.

Question

Quizplus · Accepted Answer

If the capivari had nothing backing its value, it would be considered fiat money. Fiat money is a currency that has no intrinsic value and is not backed by a physical commodity, but derives its value from the government's decree or order. In this case, the city government of Silva Jardim created the capivari currency by decree, so it would be classified as fiat money.

Recall the Application About the Brazilian City of Silva Jardim