the second type of money is fiat money, which does away with the need to represent a physical commodity and takes on its worth the same way gold did: by means of people's perception and faith. Fiat money was introduced because gold is a scarce resource and economies growing quickly couldn't always mine enough gold to back their money requirement. For a booming economy, the need for gold to give money value is extremely inefficient, especially when, as we already established, value is really created through people's perception.
Read more: What Is Money? | Investopedia http://www.investopedia.com/articles/basics/03/061303.asp#ixzz3wHDZbifz
Follow us: Investopedia on Facebook