Question

In order to be considered money, paper currency must be

A) Convertible into a precious metal.
B) Impossible to counterfeit.
C) Issued by a chartered bank.
D) Issued by a government agency.

Answer 1

Paper currency is considered money when it is issued by a government agency, as it is fiat money with value derived from legal status rather than intrinsic worth.

Step-by-step explanation:

In order to be considered money, paper currency must be issued by a government agency. This is because modern paper currency is typically fiat money, meaning it gets its value not from being convertible into precious metals or any intrinsic worth of the paper itself but from its status as a government-backed means of payment. The fiat money system is based on universal faith and trust that the currency has value, as declared by a government. For instance, U.S. paper money includes the statement "THIS NOTE IS LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE," indicating its legal status as payment for debts. It is not the impossibility of counterfeiting, nor being issued by a chartered bank, nor convertibility into precious metals that defines it as money, but rather its designation as legal tender by a government.