Which of the following is an example of fiat money?
A) a cowry shell used as money on a South Pacific island
B) a gold coin used as money in nineteenth century England
C) a Federal Reserve Note used as money in the twenty-first century United States
D) a pound of salt used as money in medieval France

Question

Quizplus · Accepted Answer

Fiat money is money that has value simply because the government declares it to be legal tender. Federal Reserve notes, which are issued by the U.S. central bank, are examples of fiat money. A cowry shell (A) and a pound of salt (D) may have been used as forms of money in the past, but they are not considered fiat money because their value was based on their usefulness as commodities rather than on government decree. A gold coin (B) is a type of commodity money, which has value in and of itself.

Which of the Following Is an Example of Fiat Money