Why is fiat currency more vulnerable to dramatic economic shifts than currency on the gold standard?%0D%0A%0D%0A(1 point)%0D%0AResponses%0D%0A%0D%0AFiat currency is generally used in countries with weak economies.%0D%0A%0D%0AFiat currency is generally used in countries with weak economies.%0D%0A%0D%0AFiat currency is backed by silver, which is less valuable than gold.%0D%0A%0D%0AFiat currency is backed by silver, which is less valuable than gold.%0D%0A%0D%0AFiat currency is backed by the government, so it is not as stable as gold.%0D%0A%0D%0AFiat currency is backed by the government, so it is not as stable as gold.%0D%0A%0D%0AFiat currency includes government bonds and the gold standard does not.
Fiat currency is more vulnerable to dramatic economic shifts than currency on the gold standard because it is not backed by a physical commodity like gold. Fiat currency derives its value from the trust and confidence people have in the government issuing it. In times of economic instability or loss of confidence in the government, the value of fiat currency can rapidly decline. On the other hand, currency on the gold standard is directly linked to the value of gold, which tends to be more stable and less susceptible to sudden fluctuations.
