Which of the following best represents fiat money?

• A. Gold coins used for trade
• B. Checks written against a bank account
• C. Silver bars exchanged in markets
• D. Paper currency issued by a government that is not backed by a physical commodity

Answer: (D)

Verified step by step guidance

1. Understand the definition of fiat money: Fiat money is a type of currency that a government declares to be legal tender, but it is not backed by a physical commodity like gold or silver.
2. Analyze each option to see if it fits the definition of fiat money:
3. Gold coins and silver bars are physical commodities with intrinsic value, so they are not fiat money.
4. Checks represent claims on bank deposits and are not themselves currency, so they are not fiat money.
5. Paper currency issued by a government without backing by a physical commodity fits the definition of fiat money because its value comes from government decree and public trust.
6. Conclude that the best representation of fiat money among the options is the paper currency issued by a government that is not backed by a physical commodity.