The term is, however, usually reserved for legal-tender paper money or coins that have face values far exceeding their commodity values and are not redeemable in gold or silver . b.Fiat money eliminates the need for monetary policy and the Federal Reserve?s role in managing the money supply. In the Tang Dynasty (618-907), there was a high demand for metallic currency that exceeded the supply of precious metals. Fiat vs. Representative Money: An Overview . b. fiat money with no intrinsic value. “The undermining of fiat money has been going on for over 40 years, and this has led to a lower standard of living, undermined social trust, and given far more power to the government. Start studying Unit 4 Economics. Fiat money originated from China in the 10 th century, mainly in the Yuan, Tang, Song, and Ming dynasties. a. Fiat money is tied to a fixed quantity of gold and therefore protects against inflation. Fiat money is a currency (a medium of exchange) established as money, often by government regulation, that does not have intrinsic value.Fiat money does not have use value (inherent utility, such as a cow or beaver pelt might have), and has value only because a government maintains its value, or because parties engaging in exchange agree on its value. Fiat money is physical money—paper money and coins—while representative money is something that represents the intent to pay such as a check. The fiat money vs. gold standard debate has been doing the rounds for quite a while. The people were familiar with the use of credit notes, and they readily accepted pieces of paper or paper drafts. It consists of a set of mechanisms used by governments to provide money to the consumers and to control the exchange of money and its supply, especially by adjusting the rates of interest in the market.. Fiat money, in a broad sense, all kinds of money that are made legal tender by a government decree or fiat. Fiat Money. Your dollar isn't worth the paper it's written on. Fiat money is also very flexible and can be used in the payment of a variety of amounts, large and small. Fiat money gets its value from a government order (i.e., fiat). c.All fiat money is a type of soft currency that trades only within the issuing country. During most of the 1800s, the United States had a bimetallic system of money; however, it was essentially on a gold standard as very little silver was traded. Both fiat money and commodity money can be used to make payments, but of the two, fiat money is much more popular and widely used in … If they fail to do so, they may be fined or even put in prison. That means, the government declares fiat money to be legal tender, which requires all people and firms within the country to accept it as a means of payment. 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