image credit: Unsplash

Fiat Money vs. Legal Tender: What’s the Difference?

June 14, 2021

Fiat money does not have any intrinsic value. What value it has depends on public confidence in the currency’s issuer. Legal tender is any currency declared legal by a government. Many governments issue a fiat currency and then make it legal tender by setting it as the standard for repaying debt.

Fiat Money

Fiat money is not backed by physical commodities, such as gold. Instead, it is government-backed. Most paper currencies today are fiat currencies. Fiat money value is based on the relationship between supply and demand. Fiat holds value because of people’s faith in that nation’s currency.

Read More on Investopedia