Select the correct statement about fiat money. Question 11 options: a. Fiat mone

Question

Select the correct statement about fiat money.

Question 11 options:

a. Fiat money is tied to a fixed quantity of gold and therefore protects against inflation.

b.Fiat money eliminates the need for monetary policy and the Federal Reserve?s role in managing the money supply.

c.All fiat money is a type of soft currency that trades only within the issuing country.

d.The U.S. dollar is fiat money

a. Fiat money is tied to a fixed quantity of gold and therefore protects against inflation.

b.Fiat money eliminates the need for monetary policy and the Federal Reserve?s role in managing the money supply.

c.All fiat money is a type of soft currency that trades only within the issuing country.

d.The U.S. dollar is fiat money

Explanation / Answer

The US dollar is fiat money

Fiat money is the currency that a government has declared to be legal tender, but is not backed by a physical commodity lie gold. Earlier, most currencies were based on physical commodities such as gold or silver, but fiat money is based solely on faith. It is not that it eliminates the need for monetary policy and Fed. And nor it is that it can just be used in issuing currency.

US dollar is fiat money. It is not backed up by gold. US still needs monetary policy and Fed's intervention and is used widely in international transactions

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