Question : The currency issued by the central bank is called ___________.
Option 1: Fiat money
Option 2: Commodity money
Option 3: Digital money
Option 4: Credit money
Correct Answer: Fiat money
Solution : The correct answer is (a) Fiat money.
The currency issued by the central bank is called fiat money. Fiat money is a type of currency that has value because the government declares it to be legal tender and it is widely accepted by people within an economy. It is not backed by a physical commodity, such as gold or silver, but rather by the trust and confidence of the public in the government and the central bank. Fiat money is typically in the form of banknotes and coins, although with advancements in technology, digital forms of fiat money have also become prevalent. Commodity money refers to a type of currency that has intrinsic value because it is made of a valuable commodity, such as gold or silver. Digital money represents digital or electronic forms of payment, which can include both fiat money and other forms of digital currency. Credit money refers to money that is created by banks through the extension of credit, such as loans and advances, and represents a claim on future repayment rather than physical currency issued by the central bank.
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