Question

Suppose a period of continuous political instability leads to people to believe that the economy will slide into a deep recession. As a result, people become more likely to accept ________ money in exchange for goods and services.

A. Flat
B. Commodity
U.S. Dollars are an example of _____ money.
A. Flat
B. Commodity

Answer 1

People often prefer fiat money during unstable times; it's declared legal tender by government decree. U.S. Dollars are an example of fiat money, relying on legal status and trust rather than a physical commodity.

Step-by-step explanation:

During times of political instability and fear of recession, people often become more likely to accept fiat money in exchange for goods and services. Fiat money is money that has no intrinsic value itself but is made legal tender by a government decree. In contrast, commodity money is money that has value independent of its use as currency, such as gold or silver coins.

The currency utilized in the United States, such as U.S. Dollars, is an example of fiat money. This is because it is backed not by a physical commodity but by the legal decree of the government and the collective trust in its value.