Questions and Answers
The government has designed paper currency to be legal tender.
True
People do not accept paper currency in exchange for goods and services.
False
Legal tender means that currency has no value.
False
Goods and services can be exchanged for paper currency.
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Checks are promises to pay on demand money deposited with a financial institution.
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Currency is accepted mostly due to market demand alone, without government regulation.
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Checks cannot be used to pay for goods and services.
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A check is a form of legal tender.
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Checks require funds to be deposited with a bank or other financial institution to be valid.
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Checks are a form of credit issued by the bank.
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Study Notes
Currency and Legal Tender
- Paper currency is widely accepted for transactions due to its designation as legal tender by the government.
- Legal tender status ensures that creditors must accept it as a means of payment.
Function of Checks
- Checks serve as written promises to pay a specified amount of money.
- They are issued against money deposited in a bank or other financial institution.
- Checks enable individuals to transfer funds from one account to another without needing physical cash.
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Description
This quiz explores the concept of paper currency as legal tender. Learn why people accept it in exchange for goods and services, and the role of government in establishing its value. Test your knowledge on this fundamental economic principle.
