46

Question 46

Which one of the following statements correctly describes the meaning of legal tender money?

AOptions

A
A) The money which is tendered in courts of law to defray the fee of legal cases
B
B) The money which a creditor is under compulsion to accept in settlement of his claims
C
C) The bank money in the form of cheques, drafts, bills of exchange, etc.
D
D) The metallic money in circulation in a country

BSolution

Legal tender money refers to any official medium of payment recognized by law that can be used to extinguish a public or private debt. If a creditor is offered legal tender in settlement of a debt, they are legally compelled to accept it. Refusal to accept legal tender for a debt means the debt is still considered paid in the eyes of the law, even if the creditor did not physically receive the funds.

  • A) This option describes money used for legal fees, which is a specific application, not the definition.
  • B) This precisely defines legal tender: it is money that *must* be accepted in payment of a debt.
  • C) Bank money in the form of cheques, drafts, etc., is not legal tender. A creditor is not obliged to accept them; they are promises to pay, not the final payment itself.
  • D) While metallic money can be legal tender, this option describes only one form of money and not the inherent characteristic of being legally mandated for debt settlement.
Diagram for Q46

CStrategy

For questions on economic terms, focus on understanding the precise definitions. Differentiate between various forms of money and their legal standing (e.g., cash vs. cheques as legal tender).

DSyllabus Analysis

This question falls under Indian Economy, specifically monetary economics and the banking system.

EQuestion Analysis

Easy. A fundamental concept in economics and financial literacy.