My economics professor asked us this question on the very first day of class. I wanted to see if the popular answer here would be the same.
So what gives the U.S. dollar it's value? What is it backed by? Is it backed by gold, silver, is there no reason, they just print as much money as they want, or is there some other reason?
Take the poll and I will post the answer later. I want to see if the results are as surprising here as they were in class.
If it were supply and demand we would be in big trouble cause we don't supply much anymore.
for some odd reason, i went with land ownership over gold reserves. i sure BOTH of them are wrong, anyways!!
I'm pretty sure it's gold, but always a possibility of being wrong.
It's nothing....went off the gold reserve back in the 70s maybe?
OK, time for the answer.
The U.S. dollar is NOT backed by gold or any other reserves. Yes, at one time it was, and you may even be able to find some old silver certificates lying around, but the United States currency has not been backed by gold in 40+ years.
Todays dollar is "fiat money." Meaning, that it is unbacked by any physical asset. Instead, currency is backed by future claims to wealth of American taxpayers. Therefore, it is backed by future demand for the dollar, a demand for different denominations, and a demand for something to trade between employers, retailers, etc.
But, who supplies the money??? It's not the government, they have no say in how much money is printed. The Federal Reserve decides how much money to supply.
Therefore, your answer is: supply and demand.
I believe they need to up the supply a little bit.
Well it all started when Roosevelt was trying to bring us out of the depression. Everything was backed by gold then and Roosevelt couldn't inflate the U.S. dollar with it being backed in gold. This led way to the way it is now.