What type of money derives its value from government decree?

Fiat money derives its value from government decree, meaning that it is established as legal tender by the government and does not have intrinsic value or a physical commodity backing it, such as gold or silver. The value of fiat money is primarily based on the trust and confidence that individuals and businesses have in the government that issues it, as well as the stability of the economy.

Unlike commodity money, which is backed by a physical good with intrinsic value, or other forms of money that may have value based on their usefulness, fiat money gains its value from the authority of the issuing government. When people accept and use fiat money for transactions, they are essentially agreeing to its value as determined by that authority. This is a fundamental concept in modern monetary systems where currencies like the US dollar, euro, and many others operate primarily on the basis of trust in the government and the economy rather than a physical asset.