Which of the following is an attribute unique to fiat money, and not shared with commodity-backed money?

• A. It can be exchanged for a fixed amount of gold or silver.
• B. It derives its value from the commodity it represents.
• C. It is used as a medium of exchange.
• D. Its value is not backed by a physical commodity.

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the definitions of the types of money involved. Commodity-backed money is money that can be exchanged for a fixed amount of a physical commodity, such as gold or silver. Fiat money, on the other hand, is money that has value because the government declares it to be legal tender, not because it is backed by a physical commodity.
2. Step 2: Identify the attributes of commodity-backed money. These include the ability to be exchanged for a fixed amount of a commodity and deriving value from the commodity it represents.
3. Step 3: Identify the attributes of fiat money. Fiat money is used as a medium of exchange like commodity-backed money, but its unique attribute is that its value is not backed by any physical commodity.
4. Step 4: Compare the options given in the problem to these attributes. The attribute unique to fiat money is that its value is not backed by a physical commodity, which distinguishes it from commodity-backed money.
5. Step 5: Conclude that the correct answer is the attribute that states 'Its value is not backed by a physical commodity,' as this is the defining characteristic unique to fiat money.