Which of the following statements about fiat money is false? Choose one: A. The use of a fiat money is authorized by the government. B. The use of a fiat money permits easy expansion of the money supply. C. Fiat money has little to no intrinsic value. D. Fiat money is backed by a commodity. E. Fiat money can serve as a medium of exchange.

Question

Olivia Huber

Business

3 July, 18:16

Which of the following statements about fiat money is false? Choose one: A. The use of a fiat money is authorized by the government. B. The use of a fiat money permits easy expansion of the money supply. C. Fiat money has little to no intrinsic value. D. Fiat money is backed by a commodity. E. Fiat money can serve as a medium of exchange.

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Answers (1)

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Austin Willis · Answer 1

D. Fiat money is backed by a commodity.

Explanation:

Fiat money is legal tender issued by a government that is not backed by a commodity such as gold. The issuing government backs fiat currency. The government though the central bank has better control of fiat money as it is the issuer. The value of a fiat currency depends on the stability of the issuing government, and its supply and demand.

Fiat currency differs from commodity money, which is currency backed by commodities such as gold or silver. Currently, the Us dollar, the Euro and a majority of world currencies are fiat money. Before 1971, the US dollar was commodity money backed by standard gold.