Fiat currency

Definition

Fiat currency is a type of money that has no intrinsic value and is not backed by a physical commodity but is made legal tender by government decree. Its value comes from the trust and recognition it receives from the people who use it for transactions.

Related terms

Legal Tender: Currency that must be accepted if offered in payment of a debt.

Inflation: The rate at which the general level of prices for goods and services is rising, eroding purchasing power.

Monetary Policy: The process by which the monetary authority of a country controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency