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Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: Money and Banking

Question:

Read the following statements - Assertion (A) and Reason (R):
Assertion: Demand deposits are not the legal tender.
Reasoning: Since demand deposit are with bank, they can be used a s a legal tender by issuing cheques.
From the given alternatives choose the correct one:

Options:

Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).

Assertion (A) is true but Reason (R) is false.

Assertion (A) is false but Reason (R) is true.

Correct Answer:

Assertion (A) is true but Reason (R) is false.

Explanation:

The correct answer is option 3:: Assertion (A) is true but Reason (R) is false.

  • Assertion (A): This is true. Demand deposits are not considered legal tender. Legal tender is currency that must be accepted if offered in payment of a debt, and demand deposits are not physical currency.

  • Reason (R): This is False. While it is true that demand deposits can be used for transactions through cheques, this does not make them legal tender. Legal tender refers specifically to the physical currency issued by the government, whereas demand deposits are merely a claim on the bank's reserves.

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