Last modified on 19 June 2011, at 11:36

Fiat money

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Fiat money is currency that is valuable only because it has been declared as such by a governing body and is required for settling taxes or other governmental debts. It is not backed fully by precious metal or any other resource. Fiat money's value is dependant on scarcity; inflation occurs when excessive fiat money is produced. The U.S. Dollar is an example of fiat money.