Understanding Money and Currency Concepts

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Questions and Answers

Which of the following currencies is considered legal tender in El-Salvador?

Indian Rupee

Euro

Canadian Dollar

Bitcoin (correct)

What defines fiat money in terms of its use?

It is issued by the government and accepted as payment. (correct)

It can be used for all transactions without government permission.

It must be backed by physical commodities.

It is created through private institutions.

Which of the following is NOT considered fiat money?

Indian Rupee

Bitcoin (correct)

Chinese Yuan

Commemorative Coins

Why are cheques and credit cards not considered fiat money?

They are not directly issued by a government. Signup and view all the answers

What distinguishes commemorative coins from fiat money?

They require government notification to be used as legal tender. Signup and view all the answers

Which of the following statements is true about the Indian Rupee?

It is recognized as fiat money. Signup and view all the answers

What is one characteristic of G-Sec and T-Bills?

They are government-issued securities. Signup and view all the answers

Which of the following is an example of a cryptocurrency?

Bitcoin Signup and view all the answers

What is a primary disadvantage of the barter system?

Difficulty in finding mutual coincidence of wants Signup and view all the answers

Which of the following types of money has intrinsic value?

Commodity Money Signup and view all the answers

What distinguishes full-bodied coins from token coins?

Face value compared to intrinsic value Signup and view all the answers

Which type of money is primarily used today for everyday transactions?

Paper Money Signup and view all the answers

What is a characteristic of metallic money?

Can be token or full-bodied Signup and view all the answers

How does paper money derive its value?

From the government that issues it Signup and view all the answers

Which statement correctly describes token coins?

Have a face value greater than intrinsic value Signup and view all the answers

What definition best represents commodity money?

Value derived from the underlying commodity Signup and view all the answers

What is the primary role of Viceroy Ripon’s Negotiable Instruments Act, 1881?

To prevent cheque dishonor and forgery Signup and view all the answers

Which type of cheque cannot be encashed after a specific number of months?

Stale cheque Signup and view all the answers

What does MICR stand for in banking terminology?

Magnetic Ink Character Recognition Signup and view all the answers

What are some examples of commodity money?

Iron Nails Signup and view all the answers

Which type of money is associated with intrinsic value that equals or exceeds its face value?

Commodity Money Signup and view all the answers

Which of the following is NOT a type of cheque?

Green cheque Signup and view all the answers

What is the purpose of an IFSC code?

To identify the branch of a bank Signup and view all the answers

Which of the following is true about metallic money?

It was trusted for its uniformity and stamped marks. Signup and view all the answers

What characteristic differentiates a bearer cheque from other types of cheques?

Anyone can encash it without specific crossing Signup and view all the answers

What is a challenge associated with token coins as seen in the 1330s?

Debasement of metal content in coins. Signup and view all the answers

What is considered 'bad money' in the context of Gresham's Law?

Currency that is devaluated or less trusted Signup and view all the answers

Which ruler is NOT associated with the issuance of metallic money?

Chandragupta Signup and view all the answers

What does the term 'redenomination' refer to in banking?

Changing the face value of a currency Signup and view all the answers

What type of currency involves paper or digital notes that are not backed by physical commodities?

Fiat Money Signup and view all the answers

Which of the following coins was issued by the Delhi Sultanate?

Tanka Signup and view all the answers

What was a key benefit of metallic money over commodity money?

Uniformity and trust due to stamping Signup and view all the answers

Which characteristic makes token coins distinct from full bodied coins?

Less intrinsic value than face value Signup and view all the answers

What was a significant outcome of Tughlaq's experimentation with token coins?

Debasement and failure Signup and view all the answers

What is the maximum transaction limit for UPI Lite per transaction as of September 1, 2023?

₹500 Signup and view all the answers

Which feature of UPI Lite allows for offline payments?

Near Field Communication (NFC) Signup and view all the answers

What is the maximum total transaction amount permitted within 24 hours using UPI Lite?

₹4000 Signup and view all the answers

What is the purpose of conversational payments in UPI?

To enable AI-driven chat for payments Signup and view all the answers

Why is the RBI involved in the development of UPI technologies?

It regulates all digital payment technologies Signup and view all the answers

What is the maximum storage capacity of a UPI Lite wallet?

₹2000 Signup and view all the answers

What does the UPI single-block-and-multiple-debits functionality signify?

Single transaction can lead to multiple debits Signup and view all the answers

What is the primary function of the UPI QR Code based coin vending machine introduced in 2023?

To allow users to get coins via scanning a QR code and transferring money via UPI Signup and view all the answers

What does the acronym BHIM stand for in the context of UPI?

Bharat Interface for Money Signup and view all the answers

Which of the following statements accurately describes the BHIM app?

It includes a three-factor authentication system. Signup and view all the answers

What is a key characteristic of RuPay cards compared to other payment gateways?

They charge less fees than other companies. Signup and view all the answers

Where can RuPay cards be used?

ATMs, Point of Sale devices, and online portals Signup and view all the answers

What is a significant difference between how BHIM stores user money compared to apps like Mobikwick?

BHIM keeps money in the user's bank account earning interest. Signup and view all the answers

What technology does the BHIM app utilize to operate on non-smartphones?

*99# USSD technology Signup and view all the answers

Which of the following is NOT a limitation associated with the RuPay payment gateway?

It charges higher fees than other gateways. Signup and view all the answers

Study Notes

10 Brief Info about Economy course (PCB11-Raftaar)

This course focuses solely on economy-related topics for the UPSC prelims exam.
It doesn't cover the mains syllabus.
Students can access recorded lectures from previous courses if they prefer that to live classes.

Myths about Economy for UPSC Prelims

The key to success in the UPSC prelims is understanding the core economic concepts.
Past performance isn't a reliable predictor of future performance.
Economic topics aren't static; they evolve.
Students must keep abreast of current events.

PYQ Analysis: Increased diversity in Economy topics in Prelims

The variety and complexity of economy MCQs are increasing in recent prelims exams.
Handouts may expand due to this increase in diversity.
Students shouldn't be misled by the negative portrayal of notes from coaching materials.

PYQ Analysis: Marks Distribution in UPSC Prelims and Mains

The table shows the distribution of marks allocated to various economic topics in the UPSC prelims and mains exam for the years 2018-2023.
The data provided highlights the utility of studying particular economic topics.

Barter system & its disadvantages

The barter system was initially used by Mesopotamian tribes.
It faces challenges due to a lack of double coincidence of wants, high transaction costs, and difficulty storing perishable goods.
A clear disadvantage is the inability to effectively manage specialization and division of labor.

Money: Functions of

Money acts as a measure of value, a medium of exchange, and facilitator/enabler of deferred payments.
Money underpins financial markets.
Money makes possible the employment of factors of production.

Money: Evolution & Types (Commodity/Metallic/Paper)

Commodity money (intrinsic value) included items like iron nails, animal skins, or precious metals.
Metallic (e.g., coins) money also had intrinsic value, a concept important to understanding money's role.
Paper money does not inherently possess value but represents a government's promise.

Demonetization of Fiat Money (1946, 1978)

Demonetization involves revoking the legal tender status of currency notes.
In 2016, ₹500 and ₹1000 notes were demonetized, although a ₹2000 note was introduced and later pulled from circulation.

2000 Note- Withdrawn from Circulation

₹2000 notes were withdrawn but not demonetized.
The notes remained legal tender.

Money Types: Gresham's Law (Good vs. Bad Money)

Gresham's Law explains that bad money drives out good money in circulation.
This concept helps explain the dynamics of money in an economy.

Bank Money / Deposit Money (Paper orders, Cheque, DD)

Cheques, demand drafts (DDs), are paper-based orders used in bank transfers.
Cheque Truncation System (CTS) and Positive Pay Mechanism are ways to improve security.
Overdraft facility allows for borrowing against insufficient funds.

Electronic Orders / Digital payment (Core Banking Solution/system)

Core Banking Solution (CBS): Centralized software for banks.
NEFT, RTGS, and IMPS are electronic payment methods.

National Payment Corporation of India(NPCI)

NPCI is a company registered under the Companies Act of 2013.
It was established by ten banks.

UPI (Unified Payments Interface)

UPI is a technology enabling digital payment apps to function via mobile phones.
Key features: QR codes for payments, interoperability, daily transaction limits, and push/pull transactions.

Various reports from RBI on digital payments track the evolution of digital payments.

Crypto-Currency & Blockchain Technology

Cryptocurrency is a digital/virtual currency utilizing blockchain technology for security.
Blockchain is a distributed, secured database.
Bitcoin and other cryptocurrencies are often discussed.

Central Bank Digital Currency (CBDC)

CBDC represents a form of digital currency issued by a central bank. Notable nations exploring or implementing CBDC are discussed.

Global Regulations

The European Union, through the Markets in Crypto Assets (MiCA), established regulations about crypto assets.
The OECD also set up framework guidelines to direct crypto-currency regulation in other parts of the world.

Measures to promote Cashless Economy

The Reserve Bank of India imposed restrictions on cash transactions, which is further explained in the context of promoting a cashless economy.
A special fund has been established to assist in this transition.

Global Money Transfer

UPI facilitates international money transfers.
Agreements between countries allow for the use of local currencies in payments.

Financial Messaging Systems: SWIFT

SWIFT is a global financial messaging system used in international transactions, relevant in context of the Russia-Ukraine situation.

Payment System Operators

Major payment service providers (e.g., Paytm, PhonePe) are discussed as Payment System Operators (PSOs).

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Description

This quiz explores key concepts related to money and currency, including fiat money, cryptocurrencies, and the characteristics that differentiate various forms of money. Test your knowledge on legal tender in different countries and the historical significance of monetary instruments. Ideal for students and finance enthusiasts alike.