Q. Consider the following statements regarding money:

1. Currency notes and coins are called fiat money.
2. This means that if someone produces the note to RBI, or any other commercial bank, RBI will be responsible for giving the person purchasing power equal to the value printed on the note.

Which of the above statements is / are correct?
Answer: Both 1 and 2
Notes: Both statements are correct. Currency notes and coins are termed fiat money as they are legal tenders without intrinsic value. The RBI guarantees to provide purchasing power equal to the note's face value to the bearer, as declared on the note, ensuring that such currency is accepted as payment for all transactions within India.