Chapter 14, Problem 11AA

To determine

To evaluate:The type of money that is used in the United States where the commodity money, representing money, or fiat money.

Explanation of Solution

Currency issued by the government that is not backed by gold is termed as fiat money. The fiat money is used by the central bank to influence the economic situation of a country. As the central bank can influence how much money is being produced. Any of the main paper currency is a fiat currency, for example, the US dollar.

The US dollar, like the euro and many other big currencies around the world, is fiat currency. This approach varies from money which is based on other tangible resources, called commodity currency, like gold or silver. For example, for much of the late 19th and early 20th centuries, the USA adopted a gold standard.