Question

Which of the following statements accurately describe the nature of Fiat and Fiduciary money?
A. Fiat money has no intrinsic value and is not backed by physical commodities.
B. Fiduciary money's value is solely based on a government order.
C. Examples of fiduciary money include checks and promissory notes.
D. Fiat money is always redeemable for gold or silver.

• A. A and C only
• B. B and D only
• C. A, C, and D only
• D. A and B only

Hint:

Fiat money has no intrinsic value, while fiduciary money relies on trust in the issuing institution. Both are essential in modern economies.

Answer 1

The Correct Option is A

Fiat money is currency that has no intrinsic value and is not backed by any physical commodity such as gold or silver. It derives its value solely from the trust placed in the government that issues it.
An example of fiat money would be the paper currency or coins issued by a government, such as the Indian Rupee or US Dollar.
Fiduciary money, on the other hand, is money whose value is derived from the trust and confidence people have in the institution that issues it. It is not backed by physical commodities but rather by the promise of the issuing authority.
Examples of fiduciary money include checks, promissory notes, and other financial instruments that are used as money because people trust the issuer.
Option D is incorrect because fiat money is not redeemable for gold or silver, which was the case before the gold standard was abandoned.