Fiat money has value because:
A) it is backed by gold
B) people believe it has value
C) it has intrinsic value
D) it is backed by silver
E) None of these answers are correct.

Question

Quizplus · Accepted Answer

Fiat money does not have intrinsic value (option C) as it is not valuable based on its physical properties. It is also no longer backed by gold or silver (options A and D) like it once was. However, it does have value because people believe it does (option B). The government and central banks declare fiat money as legal tender and require it for payment of taxes, which gives it its value through social contract and trust in the stability of the economy.

Fiat Money Has Value Because