ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A fiat money is a type of currency that is declared legal tender by a government but has no intrinsic or fixed value and is not backed by any tangible asset, such as gold or silver.

Detailed explanation-2: -Legal tender refers to any currency that is declared as legal by the government while fiat money is referred to as money that is not backed up by any physical commodities such as gold. They are backed by the government. Fiat currencies provide more control to the central banks over the economy.

Detailed explanation-3: -This type of money is also termed as legal tender as notified by the Central Government and Central Bank. This is unlike the commodity money; it might not have an intrinsic value. Paper currencies and metal coins are examples of fiat money.

Detailed explanation-4: -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-5: -Fiat money generally does not have intrinsic value and does not have use value. It has value only because the individuals who use it as a unit of account – or, in the case of currency, a medium of exchange – agree on its value. They trust that it will be accepted by merchants and other people.