Part 1Which of the following is a disadvantage of using fiat money LOADING... ?Part 2
A. Fiat money is not portable or widely accepted B. Fiat money is not easily divisible or suitable for small purchases C. Public authorities may be tempted to produce too much of it

Question

Part 1Which of the following is a disadvantage of using fiat money LOADING... ​?Part 2
A. Fiat money is not portable or widely accepted B. Fiat money is not easily divisible or suitable for small purchases C. Public authorities may be tempted to produce too much of it

BlackTom AI · Accepted Answer

Part 1 and Part 2 together present the question about the disadvantages of fiat money. Let’s examine each option in turn to see what it says and whether it plausibly highlights a drawback of fiat currency.
Option A: 'Fiat money is not portable or widely accepted.' In reality, fiat money is typically highly portable and widely accepted within the country that issues it, and often accepted for most transactions. The claim that it is not portable or widely accepted contradicts how fiat money is designed and used, so this option expresses a misconception about the practical characteristics of fiat currencies.
Option B: 'Fiat money is not easily divisible or suitable for small purchases.' This statement runs counter to how fiat money functions in everyday life. Governments and central banks issue fiat money in denominations that are easily divisible for transactions of varying sizes, enabling small purchases without issue. The design of coins and banknotes—or their digital equivalents—supports making change and precise payments, so this option misstates the actual divisibility property of fiat money.
Option C: 'Public authorities may be tempted to produce too much of it.' This captures a well-known theoretical disadvantage: fiat money has no inherent commodity backing, so its supply is controlled by authorities. That incentive structure can lead to overproduction (or over-issuance), contributing to inflation or hyperinflation, and thus undermining purchasing power. This is a recognized risk and a typical critique of fiat money systems.
In summary, Options A and B misstate the practical features of fiat money, while Option C correctly identifies a common downside related to monetary policy and potential overissuance. The reasoning highlights why the suggested drawback of overproduction by authorities aligns with concerns about fiat money's lack of intrinsic value backing and the political economy of money creation.

Homework:Chapter 3 Homework

Part 1Which of the following is a disadvantage of using fiat money LOADING... ?Part 2 A. Fiat money is not portable or widely accepted B. Fiat money is not easily divisible or suitable for small purchases C. Public authorities may be tempted to produce too much of it

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