ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Currency notes and coins are known as fiat money. Currency notes and coins are legal tender. They do not have intrinsic value like silver or gold coins. Every currency note has a promise from the Governor of RBI that the person will have the purchasing power equal to the value printed on the currency note.

Detailed explanation-2: -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-3: -2. What is legal tender? Legal Tender is a coin or a banknote that is legally tenderable for discharge of debt or obligation.

Detailed explanation-4: -Legal Tender: Legal tender refers to the money which can be legally used to make payments of debts or other obligations. Fiat money: Fiat money refers to the money which is backed with the order of the government under law. It must be accepted for all debts.

Detailed explanation-5: -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.