Which of the following statements is NOT correct?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → A gold coin is fiat money, since its value is guaranteed by the issuing authority.
Fiat money has no intrinsic value of its own. A gold coin is worth its metal, so it is not fiat money.
Option (1) Currency notes and coins are called fiat money. — True. Their value comes from the guarantee of the issuing authority, not from the paper or metal.
Option (2) Currency notes are legal tender, which no citizen can refuse for settling a transaction. — True. That is the meaning of legal tender.
Option (3) Cheques drawn on savings accounts can be refused as a mode of payment. — True. So demand deposits are not legal tender.
Option (4) A gold coin is fiat money, since its value is guaranteed by the issuing authority. — False. A gold coin has intrinsic value. The book contrasts fiat money with a gold or silver coin.
NCERT (2026-27): “THE SUPPLY OF MONEY : VARIOUS MEASURES … The value of the currency notes and coins is derived from the guarantee provided by the issuing authority of these items. … 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. Cheques drawn on savings or current accounts, however, can be refused by anyone as a mode of payment. Hence, demand deposits are not legal tenders.” |