ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Fiat money is currency that has the government backing and is declared by it to be legal tender. It is not backed by a physical commodity and thus doesn’t have any intrinsic value.

Detailed explanation-2: -’Legal tender’ is the valid money used for payment of the debt and also recognised by the law of the land. It should be accepted for the discharge of debt. The central bank has the sole right to issue banknotes as empowered by the RBI Act of 1934.

Detailed explanation-3: -Legal tender money is the officially issued money by the authority or central banks which is used for medium of exchange. The currency notes or coins issued by the RBI and the government are legal tender money. When this legal tender status is withdrawn, it will be called as demonetarization.

Detailed explanation-4: -fiat money, in a broad sense, all kinds of money that are made legal tender by a government decree or fiat. The term is, however, usually reserved for legal-tender paper money or coins that have face values far exceeding their commodity values and are not redeemable in gold or silver.