AP Macroeconomics Question 32: Answer and Explanation

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Question: 32

6. Which of the following would be an example of fiat money?

  • A. Cigarettes used as money in prisons
  • B. Dollar bills
  • C. Gold coins
  • D. Arrowheads used as a medium of exchange
  • E. Chickens used for bartering

Correct Answer: B


B Fiat money has no intrinsic value, and its value in exchange comes as the result of government order or "fiat." Cigarettes, gold, arrowheads, and chickens all have value beyond their usefulness as money, so they cannot be considered fiat money. A dollar bill, on the other hand, is a piece of paper that has value as money only because the government says it does.