Question

What "backs" the money supply in the United States? What determines the value (domestic purchasing power) of money? How does the purchasing power of money relate to the price level? Who in the United States is responsible for maintaining the money's purchasing power?

Answer 1

In the united state money supply is mainly called as fiat money. Here money have some value its only because the people of US gives some value for money. They gives or thinks money have some value because they have a great faith for US government.The faith that people have on US government backs the money supply in the united state.

Mainly the demand determines the value of money. Not only demand but also supply also determines the value of money.

If the price is high for goods and services then the purchasing power of money will become low and vise versa.

The US government as well as the Federal Reserve in the United State is responsible for maintaining the money's purchasing power.