Money And Banking
Question
Distinguish between limited legal tender and unlimited legal tender.
Solution
The legal tender status given by the government to money may be limited or unlimited.
i) Limited legal tender. It is that money which no person can be forced to accept beyond a certain maximum limit fixed by law. For instance in India, coins are limited legal tender because coins of 5, 10, 20 and 25 paise can be accepted up to maximum sum of र 1000 as per Coinage bill passed on 11th Aug. 2011. One can refuse payments by an individual in these small coins beyond this limit.
(ii) Unlimited legal tender. It is the money which a person has to accept up to any limit. There is no limit to quantity of money offered in payment. For example in India, paper notes are unlimited legal tender because all currency notes can be used to settle payments of unlimited value.
Note: that currency notes of denomination of र 2 and above are issued by RBI whereas one Rupee note and coins are issued by Ministry of Finance - Government of India.
i) Limited legal tender. It is that money which no person can be forced to accept beyond a certain maximum limit fixed by law. For instance in India, coins are limited legal tender because coins of 5, 10, 20 and 25 paise can be accepted up to maximum sum of र 1000 as per Coinage bill passed on 11th Aug. 2011. One can refuse payments by an individual in these small coins beyond this limit.
(ii) Unlimited legal tender. It is the money which a person has to accept up to any limit. There is no limit to quantity of money offered in payment. For example in India, paper notes are unlimited legal tender because all currency notes can be used to settle payments of unlimited value.
Note: that currency notes of denomination of र 2 and above are issued by RBI whereas one Rupee note and coins are issued by Ministry of Finance - Government of India.
Some More Questions From Money And Banking Chapter
What is a barter system? What are its drawbacks?
Or
What is barter (barter exchange)? State inconveniences (problems) of barter exchange. Explain any one problem of barter system.
What are the main functions of money? How does money overcome the shortcomings of a barter system?
Or
(a) Define money.
(b) Describe its functions. What is its main function?
or
Briefly explain any two/four functions of money.
or
Explain ‘medium of exchange’ function of money.
or
Explain the ‘unit of account/measure of value’ function.
or
Explain ‘standard of deferred payment function’ of money.
or
Explain the store of value function of money.
or
How has money solved the problems of barter?
or
Describe importance of money in a modern economy.
What is a ‘legal tender’? What is ‘fiat money’?
Distinguish between limited legal tender and unlimited legal tender.
Give functional definition of money.
Give narrow definition and broad definition of money.
Write short notes on the following:
Standard and Token coins.
Write short notes on the following:
Credit money
What is High Powered Money?
or
Write short notes on the following:
High powered money.
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