Final answer:
The U.S. dollar is indeed a fiat currency, meaning its value is not supported by physical commodities but by universal faith and legal decree.
Step-by-step explanation:
True, the U.S. dollar is an example of fiat currency. Its value is not supported by a physical commodity such as gold or silver. The concept of fiat money means that the currency's value is not derived from the material with which it is made, but rather from the trust and faith that people and governments place in it, allowing it to be used for the exchange of goods and services.
The move to fiat currency came as economies expanded and the use of physical commodities for money became impractical on a large scale. Governments around the world, including the United States, declared fiat money as the legal tender, as is stated on U.S. banknotes: "THIS NOTE IS LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE." Thus, these currencies are backed not by a physical good, but by a legal decree and the universal faith and trust that the money has value.