BANKING AFFAIRS

Detailed explanation-1: -The correct answer is Fiat Money. Currency notes and coins are called fiat money. They do not have intrinsic value like that of gold or silver coin. Unlike commodity money, fiat money is not backed by any physical commodity instead it is backed by the order or authority of the government.

Detailed explanation-2: -Legal tender refers to any currency that is declared as legal by the government while fiat money is referred to as money that is not backed up by any physical commodities such as gold. They are backed by the government. Fiat currencies provide more control to the central banks over the economy.

Detailed explanation-3: -Fiat money refers to money whose value has been decreed by the government.

Detailed explanation-4: -Fiat money is backed by a country’s government instead of a physical commodity or financial instrument. This means most coin and paper currencies that are used throughout the world are fiat money. This includes the U.S. dollar, the British pound, the Indian rupee, and the euro.

Detailed explanation-5: -That means, the government declares fiat money to be legal tender, which requires all people and firms within the country to accept it as a means of payment. For example: A 10 Rupee note in India issued by RBI & is signed by the Governer of RBI & is guaranteed by RBI.