Question

What is currency that is not backed by a physical commodity?

Answer 1

Currency that is not backed by a physical commodity is known as fiat currency. It derives its value from the government's declaration that it is legal tender. Examples of fiat currencies include the US dollar, Euro, Japanese yen, and British pound.

Answer 2

Currency that is not backed by a physical commodity, such as gold or silver, is called fiat currency. Fiat currency has value because a government declares it to be legal tender and because people have faith in the currency's ability to be used to buy goods and services, pay taxes, and settle debts. The value of fiat currency is largely based on supply and demand, with central banks using monetary policy to help regulate its value.

Answer 3

Currency that is not backed by a physical commodity, such as gold or silver, is referred to as a fiat currency. Fiat currency derives its value from the trust and confidence placed in the issuing authority, typically a government. Unlike commodity-backed currencies, which have intrinsic value based on the underlying commodity, fiat currencies are based on faith in the stability and acceptance of the issuing entity. The value of fiat currency is maintained through monetary policies, economic factors, and the overall trust in the currency's stability. Most modern national currencies, including the US dollar, Euro, and British pound, are examples of fiat currencies used in today's global financial systems.