ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -What is Fiat Money? Fiat money is a currency that lacks intrinsic value and is established as a legal tender by government regulation. Traditionally, currencies were backed by physical commodities such as silver and gold, but fiat money is based on the creditworthiness of the issuing government.

Detailed explanation-2: -Representative money is backed by a physical commodity such as precious metals or instruments such as checks and credit cards. Fiat money can be used to buy goods and services because both parties involved in a transaction agree on the currency’s value.

Detailed explanation-3: -Representative money is a type of money that is issued by the government and backed by commodities such as precious metals like gold or silver. Commodity money is a medium of exchange with intrinsic value due to its use for purposes other than money. Examples of this include gold and silver.

Detailed explanation-4: -Fiat money refers to money whose value has been decreed by the government.

Detailed explanation-5: -Representative money is a certificate or token that can be exchanged for the underlying commodity. For example, instead of carrying the gold commodity money with you, the gold might have been kept in a bank vault and you might carry a paper certificate that represents-or was “backed"-by the gold in the vault.