Fiat currency refers to money that is issued by a government and has value because the government maintains it and people have faith in its value. Unlike money backed by physical commodities such as gold or silver, fiat currency's value is derived from the relationship between supply and demand and the stability of the issuing government. Most modern paper currencies, such as the US Dollar, Euro, and Yen, are fiat currencies. These currencies are used for everyday transactions and are accepted as a medium of exchange, store of value, and unit of account within their respective economies. The value of fiat currency can be affected by factors such as inflation, monetary policy, and economic conditions, making it crucial for governments to manage their monetary systems effectively.
