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 is / are correct?
Answer: All of the above
Notes: Both are correct statements. Every currency note bears on its face a promise from the Governor of RBI 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. The same is also true of coins. Currency notes and coins are therefore called fiat money. They do not have intrinsic value like a gold or silver coin. They are also called legal tenders as they cannot be refused by any citizen of the country for settlement of any kind of transaction.

This question is part of UPSC Daily 20 MCQ Series Course on GKToday Android app.