Why people hold notes and coins when it is clear that the intrinsic value of notes and coins is almost negligible?

Dear student, ● People hold notes and coins even when it is clear that the intrinsic value of notes and coins is almost negligible in order to have a standard set of exchanging transaction. Every economy need to have a standard basis of legal tender in order to trade effectively. Also, the notes and coins have been declared by the government as a legal tender i.e. a fiat currency which means that no one can refuse the currency notes and coins as these has been set as a basis of a transaction as per the order of monetary authorities and government . ● Regards

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Dear student,

Notes and coins in a country(India) is backed by govt of India and RBI. It is Fiat money or legal tender money.

Fiat Money implies that the currency notes and coins do not have any intrinsic value. In other words, the real value of the paper (in case of currency notes) and metals (in case of coins) is not equivalent to the face value printed on the notes and coins. Fiat money derives its value only because of government?order?(fiat).??

The currency issued by the Monetary Authority is also known as Legal Tender Money. It implies that the values of such currency notes and coins are backed by the Monetary Authority. The Monetary Authority provides a person with purchasing power equal to the face value of the currency held by him. The fiat money becomes the legal tender when it is backed by the Monetary Authority. Moreover, the currency notes and coins issued by the Monetary Authority cannot be refused by any citizen of that country for the settlement of transactions. Therefore, it becomes the legally medium of payment in the economy.?

So no matter coins or notes have any intrinsic value or not...


Regards
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