1.

What is a ‘legal tender’? What is ‘fiat money’?

Answer»

1. Legal tender: 

(a) Legally, money is anything proclaimed by law as a medium of exchange. 

(b) Paper notes and coins (together called currency) is money as a matter of law. 

(c) Nobody can refuse its acceptance as medium of exchange. 

2. FIAT Money: It is defined as a money which is under the ‘FIAT’ (order/authority) of the government to act as a money.



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