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 is not backed by a physical commodity like gold, but rather by the government's guarantee of its value. This means that the value of fiat currency is largely dependent on the stability and credibility of the government issuing it. In times of economic uncertainty or political instability, the value of fiat currency can fluctuate significantly, making it more vulnerable to dramatic economic shifts compared to currency on the gold standard, which has intrinsic value and is not influenced as much by government policies or actions.