ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A fiat currency is a national currency that is not pegged to the price of a commodity such as gold or silver. The value of fiat money is largely based on the public’s faith in the currency’s issuer, which is normally that country’s government or central bank.

Detailed explanation-2: -Why Is Fiat Money Valuable? In contrast to commodity-based money like gold coins or paper bills redeemable for precious metals, fiat money is backed entirely by the full faith and trust in the government that issued it.

Detailed explanation-3: -FIAT money is money whose face value is greater than its commodity value. In other words it has no intrinsic value and it refers to that money which is issued by order or authority of the government. It includes all notes and coins which the people in a country are legally bound to accept as a medium of exchange.

Detailed explanation-4: -fiat money, in a broad sense, all kinds of money that are made legal tender by a government decree or fiat. The term is, however, usually reserved for legal-tender paper money or coins that have face values far exceeding their commodity values and are not redeemable in gold or silver.