Fiat money is money that is accepted as legal tender by the government, but it has no intrinsic value. It is not backed by any physical commodity such as gold or silver. The value of fiat money is derived from the stability and strength of the issuing government and economy. The key characteristic of fiat money is that it is accepted by law as a medium of exchange.

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Fiat Money Is Money

Question 19

Multiple Choice

Fiat money is money:

A) accepted by law regardless of its intrinsic value.
B) that is not included as part of the M1 money supply.
C) that is backed by gold or silver held on reserve by the government.
D) such as coins that are made from metal.

Correct Answer: