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Indian EconomyEasyAsked in: UPSC Civil Services · CSE Prelims 2018, GS Paper I

Which one of the following statements correctly describes the meaning of legal tender money ?

  1. A.The money which is tendered in courts of law to defray the fee of legal cases
  2. B.The money which a creditor is under compulsion to accept in settlement of his claims
  3. C.The bank money in the form of cheques, drafts, bills of exchange, etc.
  4. D.The metallic money in circulation in a country

Correct answer

B. The money which a creditor is under compulsion to accept in settlement of his claims

Explanation

The correct answer is B, The money which a creditor is under compulsion to accept in settlement of his claims. Legal tender is money that the law says must be accepted in payment of a debt.

In India, banknotes issued by the Reserve Bank under the RBI Act, 1934 are unlimited legal tender: no one can refuse them for any amount. Coins issued under the Coinage Act, 2011 are legal tender only up to limits; for example, coins of one rupee and above up to one thousand rupees. Because the state backs it by law rather than by its metal value, such money is also called fiat money. When notes are demonetised, as with the old 500 and 1,000 rupee notes in November 2016, they stop being legal tender.

A is wrong because court fees have nothing to do with the term. C is wrong because cheques, drafts and bills are optional money: a creditor may refuse them. D is wrong because legal tender includes paper notes, and coins themselves are legal tender only up to a limit.

Exam tip: Legal tender = must be accepted; notes unlimited, coins limited; cheques are optional money.

Practice Questions

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Q1.Indian EconomyEasy

The Securities and Exchange Board of India was given statutory powers by which law?

  1. A.The Securities Contracts (Regulation) Act, 1956
  2. B.The Companies Act, 1956
  3. C.The SEBI Act, 1992
  4. D.The Depositories Act, 1996
Show answer
Correct answer: C. The SEBI Act, 1992

SEBI was set up in 1988 as a non-statutory body and was given statutory status and powers by the Securities and Exchange Board of India Act, 1992, after which it became the regulator of the securities market, with its head office in Mumbai; appeals from its orders lie to the…

Q3.Indian EconomyMedium

Which is regarded as the first stock exchange of the world?

  1. A.London Stock Exchange
  2. B.New York Stock Exchange
  3. C.Amsterdam Stock Exchange
  4. D.Paris Bourse
Show answer
Correct answer: C. Amsterdam Stock Exchange

It was established in 1602 by the Dutch East India Company, whose shares were traded there continuously, and it is therefore counted as the world's first stock exchange; the exchange is now part of Euronext.