Part 1Which of the following is an example of fiat money? A. cigarettes in a POW (prison) camp B. a five dollar bill C. sea shells used as money in a primitive society D. a twenty dollar gold piece Part 2Which of the following statements about fiat money is false? A. Fiat money is easier to transport than commodity money. B. Fiat money is paper currency decreed by government as legal tender. C. Fiat money is redeemable into a particular precious metal such as gold. D. Fiat money should be made difficult to counterfeit.

Question

Part 1Which of the following is an example of fiat​ money? A. cigarettes in a POW​ (prison) camp B. a five dollar bill C. sea shells used as money in a primitive society D. a twenty dollar gold piece Part 2Which of the following statements about fiat money is​ false? A. Fiat money is easier to transport than commodity money. B. Fiat money is paper currency decreed by government as legal tender. C. Fiat money is redeemable into a particular precious metal such as gold. D. Fiat money should be made difficult to counterfeit.

BlackTom AI · Accepted Answer

Examining Part 1, we need to identify which option is an example of fiat money. 
Option A: cigarettes in a POW camp. While they could serve as a medium of exchange in that context, they are not fiat money because they are not government decreed and do not have legal tender status. Their acceptability stems from circumstance, not from a formal government proclamation. 
Option B: a five dollar bill. This is fiat money because it is currency issued by the government and declared legal tender, with value not based on a specific commodity but on government decree. 
Option C: sea shells used as money in a primitive society. These are commodity money examples, since their value comes from the material itself and not from a government declaration. 
Option D: a twenty dollar gold piece. This is a classic case of commodity money or possibly representative money depending on context, but not fiat money, since its value is tied to the gold content.

Moving to Part 2, which asks for the false statement about fiat money. 
Option A: Fiat money is easier to transport than commodity money. This is true in many cases because paper currency is lighter and more portable than bulky commodities. 
Option B: Fiat money is paper currency decreed by government as legal tender. This is true and defines fiat money. 
Option C: Fiat money is redeemable into a particular precious metal such as gold. This is false; fiat money is not redeemable for a commodity, unlike gold standard or commodity/representative money. The value is backed by government decree, not by a physical commodity. 
Option D: Fiat money should be made difficult to counterfeit. This is true as a monetary security concern; preventing counterfeiting preserves trust in fiat money.

In summary for Part 1, the only example that fits the definition of fiat money is Option B, as it reflects government decree and legal tender status rather than intrinsic commodity value. In Part 2, the false statement is Option C, since fiat money is not redeemable into a precious metal. The other statements describe accurate features or considerations related to fiat money.

Quiz:Quiz 1

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