Question

The U.S. fiduciary monetary system: a. is one where money is not convertible to a valuable commodity such as gold. b. is the one agency responsible for providing coins and paper currency. c. controls the private banking system. d. puts capital controls in place.

Answer 1

The U.S. fiduciary monetary system is one where money is not convertible to a valuable commodity such as gold.

Option a

Explanation:

In fiduciary monetary system, the money is issued by the government and the value of the money depends uniquely on faith of the public that the currency represents command over services and goods. The word fiducia is from Latin and it means trust or confidence.

Fiduciary money includes demand deposits of banks namely checking accounts. Fiduciary money is accepted depending on the trust its issuer commands.

The fiduciary currency is supplied in the economy by Fed. Fiduciary money can be classified into two categories namely,

• Paper money - Includes all the banknotes
• Divisional currency - Includes all the coins