Why is fiat currency more vulnerable to dramatic economic shifts than currency on the gold standard?
a. Fiat currency is generally used in countries with weak economies.
b. Fiat currency is backed by silver, which is less valuable than gold.
c. Fiat currency is backed by the government, so it is not as stable as gold.
d. Fiat currency includes government bonds and the gold standard does not.
c. Fiat currency is backed by the government, so it is not as stable as gold.
Fiat currency derives its value from the trust and confidence that people have in the government issuing it. This makes fiat currency more vulnerable to economic shifts, as changes in government policies, inflation, or political instability can lead to sharp fluctuations in the value of the currency. On the other hand, currency on the gold standard is backed by a physical commodity (gold) with intrinsic value, making it more stable and less vulnerable to sudden economic shifts.