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Fiat money is a form of currency that has been authorized as a legal tender or an acceptable method of payment by a government. Unlike to commodity money, which derives its intrinsic worth from the material from which it is manufactured (such as silver or gold), fiat money has no intrinsic value and is not backed by any physical goods.
Fiat money's value is determined by the public's faith in the government that issues it and the health of the economy in which it is used. The value of fiat money, which is utilized in the majority of modern economies around the world, is influenced by market forces including supply and demand, inflation, and the health of the economy as a whole.
Fiat money may be controlled by governments, which gives them the ability to use monetary policy to influence the economy. This includes regulating interest rates and the money supply to meet economic objectives like preserving price stability and fostering economic growth.
Fiat money's detractors contend that because it is not connected to a tangible good with inherent worth, it is inherently unstable and subject to inflation. Supporters counter that without fiat money, contemporary economic systems would not be able to function and that it gives for greater flexibility and control over the economy.
