Which of the following statements correctly describes modern currency systems?
Show answer & explanation
Correct answer: B
Explanation
The correct answer is option 2 i.e. Currencies are not readily convertible into gold.
Modern currency systems operate on a fiat money model, meaning currencies are not readily convertible into gold or any physical commodity. Instead, their value is derived from public trust and government decree. This shift occurred globally after the collapse of the Bretton Woods system in 1971, which ended the gold standard. Today, central banks manage money supply flexibly based on economic stability and growth needs, rather than being restricted by physical gold reserves.