Question #55

Under a fiat monetary system, the absence of convertibility means

• there is no reason for people to hold currency as a hedge against gold price falls.
• that the government can motivate people to exchange goods and services in return for public spending by fining anyone of working age who walks down the street.
• that the currency is only convertible into government bonds rather than gold.

Answer #540

Answer: that the government can motivate people to exchange goods and services in return for public spending by fining anyone of working age who walks down the street.

Explanation

Please read Gold standard and fixed exchange rates - myths that still prevail or post a comment for further discussion.