Question

The Queen of England says by royal decree that the British Pound will be the currency of the land and it will be backed by the government as legal tender for all debts public and private. The British Pound is an example of:

A) Commodity Money
B) Virtual Money
C) Fiat Money

Answer 1

The answer to your question is C. Fiat Money

Step-by-step explanation:

Let me explain you the different terms:

A) Commodity Money: Commodity Money is the money whose value comes from a commodity. example gold or wine. If a person has 1 kg of gold and it has a commodity value of 1 ton of wine than the commodity value of gold is said to be 1 ton of wine. Likewise it goes with all other commodities eg silver, wheat, barley, clothes. Each item have different value against 1 kg of gold and that defines value of commodity money of gold.

B) Virtual Money: Virtual Money is the digital representation of value that is issued and controlled by its developers eg Microsoft points, amazon coin, bitcoin etc.

C) Fiat Money: Fiat Money is in-convertible paper money that is made legal tender by a government decree. Queen of England by a royal decree has established that the British Pound will be the currency of the land of England. Every country's central back establishes this type of order which then becomes that country's currency.