Which of the following pairs is correctly matched?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Legal tender – Cannot be refused by any citizen for settling any transaction
Notes and coins are legal tender because no citizen can refuse them in payment.
Option (1) Coins in India – Issued by the Reserve Bank of India — Incorrect. Coins are issued by the Government of India. The RBI issues notes.
Option (2) Store of value – Expressing the value of all goods and services in monetary units — Incorrect. This describes the unit of account.
Option (3) Velocity of circulation of money – A stock concept with no time dimension — Incorrect. Velocity is the number of times money changes hands in a period, so it has a time dimension.
Option (4) Legal tender – Cannot be refused by any citizen for settling any transaction — Correct. This is what legal tender means.
NCERT (2026-27): “The Supply of Money : Various Measures … In India currency notes are issued by the Reserve Bank of India (RBI), which is the monetary authority in India. However, coins are issued by the Government of India. … 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. …” “The Transaction Motive … where, v = 1/k is the velocity of circulation. … The velocity of money, v, however, has a time dimension. …” “3.1 Functions of Money … Money also acts as a convenient unit of account. The value of all goods and services can be expressed in monetary units. …” |