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Fiat currency

Fiat currency is backed by a central government. It is not backed by a physical commodity and its value is derived from the relationship between supply and demand rather than the value of the material from which the money is made.

It can take the form of physical dollars, or it can be represented electronically, such as with bank credit. The government controls the supply and you can pay your taxes with it.

 

Source: https://www.investopedia.com/terms/f/fiatmoney.asp

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