Fiat money has value because it
A)is backed by gold.
B)can be used to buy goods and services.
C)can be exchanged for precious metals at a fixed price.
D)can be divided into smaller units.
E)All of the above are correct.

Question

Quizplus · Accepted Answer

Fiat money has value because it is widely accepted as a medium of exchange for goods and services. It is not backed by any physical commodity such as gold or silver. Rather, it derives its value solely from the trust people have in the government issuing it and in the stability of the currency's value over time. While fiat money can be exchanged for precious metals, this is not the primary source of its value. Divisibility is a useful feature of fiat money, but it does not explain its inherent value.

Fiat Money Has Value Because It