ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A government-issued currency is known as fiat money. It is not backed by a physical commodity, like silver or gold, but by the government that declared it. The value of fiat money is determined by the relationship between supply and demand and the overall stability of the government.

Detailed explanation-2: -What Is Fiat Money? Fiat money is a government-issued currency that is not backed by a physical commodity, such as gold or silver, but rather by the government that issued it.

Detailed explanation-3: -Fiat money is physical money-both paper money and coins-while representative money is a form of currency that represents the intent to pay, such as a check.

Detailed explanation-4: -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-5: -Well-known examples of fiat currencies include the pound sterling, the euro and the US dollar. In fact, very few world currencies are true commodity currencies and most are, in one way or another, a form of fiat money.