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Question
What is fiat money?
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Solution 1
- Fiat money is defined as money that has no intrinsic value.
- It is not backed by any commodity like gold.
Solution 2
Inconvertible paper money acts as money because people have confidence in it as it is issued on the order (fiat) of the government. It is called fiat money because the government has declared it a legal tender. It is circulated in the country on the order of the government.
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