Answer to Question #48675 in Macroeconomics for Ohidul Islam

Question

What backs up the value of U.S. dollars?
A- Gold
B-Foreign currency reserves held by the Federal ReserveSystem
C-Gold denominated Federal Reserve Syestem assets
D-Faith that the dollars represent command over goods and services

Answer 1

The American dollar is backed by the faith and credit of the United States of America since we went off the Gold Standard.
There is no backing for the dollar, or any other modern currency. The value of money in the modern world is based on the belief that it has value. This may seem strange but consider that your bank account doen't contain any actual money, it is just a number that the bank keeps in a computer file. Trillions of dollars, Euros, Yen etc. exist as nothing more than computer records.
So, the right answer is D.