Fiat currency is a type of money that is issued by a government and has value because the government maintains it and people have faith in its value. Unlike commodity money, which is backed by physical goods like gold or silver, fiat currency does not have intrinsic value. Its worth is derived from the trust and confidence that individuals and businesses have in the issuing authority. Most modern economies use fiat currency, which allows for greater flexibility in managing the economy. Central banks, such as the Federal Reserve in the United States, can control the supply of money, influencing inflation and interest rates. This system enables governments to respond to economic changes more effectively.