What type of money has no intrinsic value but is made legal tender by government decree?

Fiat money refers to currency that a government has declared to be legal tender, meaning it must be accepted as a form of payment for debts and other financial obligations. Unlike commodity money, which is backed by a physical good such as gold or silver, fiat money has no intrinsic value of its own. Its value comes solely from the trust and confidence that people and the government place in it. This trust allows individuals and businesses to use fiat money in transactions, despite it not being backed by any tangible asset.

A key characteristic of fiat money is that it can be created at will by the government, allowing for flexibility in monetary policy. This flexibility is crucial for managing economic stability, inflation, and overall economic growth. The effectiveness of fiat money also relies on the stability and credibility of the issuing government, as loss of confidence can lead to depreciation and challenges in the economy.