Question

What is Money? What is Fiat Money?

Answer 1

Money is generally used to pay for something or to replay some loans etc. To be qualified as 'money', that particular object should satisfy 3 functions;

1. It has to be a good medium of excange that is by exchanging it in the market we can buy some other goods and services.

2. It has to be a good unit of account.

3. It should store its value so that it can be exchanged in the market in future.

Fiat money is approved by the government which is not made by any precious metal i.e it has no intrinsic value. Government determines the value of fiat money and this type of money has all the general functions that money should obey.