Final answer:
A fiat currency is money that is not backed by a physical commodity like gold, but rather by the trust and faith in its value, which makes it legal tender as declared by the government. Therefore, the statement is false.
Step-by-step explanation:
The statement that a fiat currency is a type of money that is backed by a commodity such as gold is false. A fiat currency is not backed by a physical commodity. Instead, its value comes from the trust and faith that individuals and governments have in the currency. Commodity-backed currencies are different in that they are tied to a tangible asset such as gold or silver. Fiat money, like the U.S. dollar, is deemed legal tender by the government, requiring all debts to be paid in that currency despite it not being backed by a physical asset. The use of fiat money has become more prevalent as economies have grown and global financial systems have evolved.