Social Studies

Question

Why do most nations use fiat money today? a. Governments are able to exert control over the value of fiat money. b. Fiat money is stable and will not lose value during economic downturns. c. Fiat money will maintain its value despite fluctuating exchange rates.d. Governments know that fiat money derives its value from gold and silver.

2 Answer

  • Most nations use fiat money today because it has no value and is only used for the purpose of making the payment.
  • The fourth alternative is correct (D).

    Countries know that their monetary system is derived from gold and silver.

    In the old days, the coin was backed by some precious metal, usually gold. Thus, for a country to issue money, it was necessary to increase its amount of gold.

    However, gold is a scarce natural resource. Thus, with the development of the global financial system and the implementation of central banks, countries have adopted fiduciary money. This means that a country has autonomy to create currency, but that can not be done in a discretionary way. , at risk of causing inflationary crises. For this, the modern central banks have control department.

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