Distinguish Between · Q10
Q.Distinguish between legal tender money and fiat money.
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Start your 14-day free trial to unlock the full solution →| Basis | Legal Tender Money | Fiat Money |
|---|---|---|
| Meaning | Money a creditor is legally bound to accept in settlement of a debt | Money that derives its value from a government order (fiat), not from any intrinsic worth of its material |
| What it concerns | Whether the LAW compels acceptance | Why the money has VALUE at all |
| Sub-types | Unlimited legal tender (any amount, e.g. currency notes) and limited legal tender (up to a specified amount, e.g. small coins) | No further sub-classification within fiat money itself |
| Example | Indian currency notes (unlimited legal tender) | Indian currency notes are also fiat money — valuable by government order, not because of the paper |
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