ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Fiat money is a form of currency that is declared legal tender. This includes money in circulation such as paper money or coins. Fiat money is backed by a country’s government instead of a physical commodity or financial instrument.

Detailed explanation-2: -What might cause a change in the value of fiat money? Value changes are the result of supply and demand. This is true with fiat currency as well as any other asset that’s subject to market forces.

Detailed explanation-3: -In monetary economics, fiat money is an intrinsically valueless object or record that is accepted widely as a means of payment. Accordingly, the value of fiat money is greater than the value of its metal or paper content. One justification for fiat money comes from a micro-founded model.

Detailed explanation-4: -The value of fiat money is based largely on public faith in the issuer. Commodity money’s value, on the other hand, is based on the material it was manufactured with, such as gold or silver. Fiat money, therefore, does not have intrinsic value, while commodity money often does.