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Outline two risks of "Fiat" Currency. In addition, how has it impacted the general purchasing power...

Outline two risks of "Fiat" Currency. In addition, how has it impacted the general purchasing power of citizens in the United States and other countries that have embraced the practice?

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Answer #1

Two risk of fiat currency are -

1 - In the period of inflation , the fiat money loses its value and consumers have to spend more.

2 - Fiat money is based upon the trust of the citizens upon their government. Hence if the consumer lose their faith upon government , fiat money will lose its value

The introduction of fiat money , in US and all the parts of the world has increased the purchasing power of the citizens. It has increase the level of convinience with which the transactions are performed and the forward contracts can take place. The purchasing power decreases inflation and vice a versa.

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