What does it mean that the money in the U.S. is fiat money?

Fiat money refers to currency that does not have intrinsic value or is not backed by physical commodities, such as gold or silver. Instead, its value is derived from the trust and confidence that people place in the issuing government. This trust allows the currency to function effectively as a medium of exchange, a unit of account, and a store of value.

In the case of the U.S. dollar, it is considered fiat money because the government has declared it to be legal tender for all debts, public and private. This affirmation by the government is what gives it value in the economy, even though the dollars themselves are made of paper and coins that do not have significant value if evaluated based on their physical materials.

The other options imply characteristics associated with forms of money that are not fiat. For instance, being backed by commodities would suggest a standard based on tangible assets, while having intrinsic value per coin indicates that the physical material of the currency itself holds worth. Lastly, the ability to be exchanged for gold or silver refers to a gold or silver standard, which has not been the system in place for U.S. currency for many decades. Thus, the distinction of fiat money is crucial for understanding how modern economies operate.