Is there any risk involved in using fiat money? How can it be minimized?
What will be an ideal response?
One of the problems of using fiat money is that since it is actually worthless, it is easy to counterfeit. Hence, the risk of counterfeiting fiat money and using it to purchase goods and services is comparatively higher. This problem is partially resolved by having the supply of money controlled by the government. The government can create fiat money that is difficult and illegal to counterfeit.
You might also like to view...
Which of the following is an example of fiat money?
A) a cowry shell used as money on a South Pacific island B) a gold coin used as money in nineteenth century England C) a Federal Reserve Note used as money in the twenty-first century United States D) a pound of salt used as money in medieval France
If a single large firm is able to produce a market’s output less expensively than many small firms is evidence that, for this market, there are
A. increasing returns to scale. B. constant returns to scale. C. decreasing returns to scale. D. regulations in place that limit production costs.
Why are interest rates considered to be the opportunity cost of investments?
In a perfectly competitive market, which two conditions must be met to achieve long-run equilibrium?
a. Productive efficiency and allocative efficiency b. Allocative efficiency and profit maximization c. Productive efficiency and low average costs d. Zero economic profits and zero accounting profits