Understanding Money and Currency Concepts
49 Questions
2 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to Lesson

Podcast

Play an AI-generated podcast conversation about this lesson

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?

<p>They are not directly issued by a government. (B)</p> Signup and view all the answers

What distinguishes commemorative coins from fiat money?

<p>They require government notification to be used as legal tender. (D)</p> Signup and view all the answers

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

<p>It is recognized as fiat money. (A)</p> Signup and view all the answers

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

<p>They are government-issued securities. (B)</p> Signup and view all the answers

Which of the following is an example of a cryptocurrency?

<p>Bitcoin (C)</p> Signup and view all the answers

What is a primary disadvantage of the barter system?

<p>Difficulty in finding mutual coincidence of wants (A)</p> Signup and view all the answers

Which of the following types of money has intrinsic value?

<p>Commodity Money (A)</p> Signup and view all the answers

What distinguishes full-bodied coins from token coins?

<p>Face value compared to intrinsic value (A)</p> Signup and view all the answers

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

<p>Paper Money (D)</p> Signup and view all the answers

What is a characteristic of metallic money?

<p>Can be token or full-bodied (B)</p> Signup and view all the answers

How does paper money derive its value?

<p>From the government that issues it (C)</p> Signup and view all the answers

Which statement correctly describes token coins?

<p>Have a face value greater than intrinsic value (D)</p> Signup and view all the answers

What definition best represents commodity money?

<p>Value derived from the underlying commodity (B)</p> Signup and view all the answers

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

<p>To prevent cheque dishonor and forgery (A)</p> Signup and view all the answers

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

<p>Stale cheque (A)</p> Signup and view all the answers

What does MICR stand for in banking terminology?

<p>Magnetic Ink Character Recognition (B)</p> Signup and view all the answers

What are some examples of commodity money?

<p>Iron Nails (D)</p> Signup and view all the answers

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

<p>Commodity Money (D)</p> Signup and view all the answers

Which of the following is NOT a type of cheque?

<p>Green cheque (B)</p> Signup and view all the answers

What is the purpose of an IFSC code?

<p>To identify the branch of a bank (C)</p> Signup and view all the answers

Which of the following is true about metallic money?

<p>It was trusted for its uniformity and stamped marks. (D)</p> Signup and view all the answers

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

<p>Anyone can encash it without specific crossing (D)</p> Signup and view all the answers

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

<p>Debasement of metal content in coins. (B)</p> Signup and view all the answers

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

<p>Currency that is devaluated or less trusted (A)</p> Signup and view all the answers

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

<p>Chandragupta (A)</p> Signup and view all the answers

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

<p>Changing the face value of a currency (B)</p> Signup and view all the answers

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

<p>Fiat Money (B)</p> Signup and view all the answers

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

<p>Tanka (B)</p> Signup and view all the answers

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

<p>Uniformity and trust due to stamping (D)</p> Signup and view all the answers

Which characteristic makes token coins distinct from full bodied coins?

<p>Less intrinsic value than face value (D)</p> Signup and view all the answers

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

<p>Debasement and failure (A)</p> Signup and view all the answers

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

<p>₹500 (D)</p> Signup and view all the answers

Which feature of UPI Lite allows for offline payments?

<p>Near Field Communication (NFC) (B)</p> Signup and view all the answers

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

<p>₹4000 (C)</p> Signup and view all the answers

What is the purpose of conversational payments in UPI?

<p>To enable AI-driven chat for payments (D)</p> Signup and view all the answers

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

<p>It regulates all digital payment technologies (A)</p> Signup and view all the answers

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

<p>₹2000 (D)</p> Signup and view all the answers

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

<p>Single transaction can lead to multiple debits (C)</p> Signup and view all the answers

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

<p>To allow users to get coins via scanning a QR code and transferring money via UPI (B)</p> Signup and view all the answers

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

<p>Bharat Interface for Money (C)</p> Signup and view all the answers

Which of the following statements accurately describes the BHIM app?

<p>It includes a three-factor authentication system. (B)</p> Signup and view all the answers

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

<p>They charge less fees than other companies. (A)</p> Signup and view all the answers

Where can RuPay cards be used?

<p>ATMs, Point of Sale devices, and online portals (D)</p> Signup and view all the answers

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

<p>BHIM keeps money in the user's bank account earning interest. (C)</p> Signup and view all the answers

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

<p>*99# USSD technology (B)</p> Signup and view all the answers

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

<p>It charges higher fees than other gateways. (B)</p> Signup and view all the answers

Flashcards

Barter System

A system of exchange where goods and services are traded directly for other goods and services without the use of money.

Disadvantages of Barter System

The barter system faces issues like lack of double coincidence of wants, difficulty in storing value, and challenges in measuring value.

Functions of Money

Money serves as a medium of exchange, a unit of account, and a store of value.

Commodity Money

Money that has intrinsic value, meaning its value comes from the material it is made of. Examples include salt, livestock, or precious metals.

Signup and view all the flashcards

Metallic Money

Money made of metal, typically gold, silver, or copper, with intrinsic value.

Signup and view all the flashcards

Full Bodied Coin

A coin where the face value is equal to the intrinsic value of the metal it is made of.

Signup and view all the flashcards

Token Coin

A coin where the face value is higher than the intrinsic value of the metal it is made of.

Signup and view all the flashcards

Intrinsic Value

The inherent value of an item based on its material or composition.

Signup and view all the flashcards

Fiat Money

Currency issued by a government and accepted as legal tender within that jurisdiction.

Signup and view all the flashcards

Legal Tender

A form of payment that a creditor is legally required to accept for a debt.

Signup and view all the flashcards

Commemorative Coins

Special coins issued to celebrate events or commemorate people, often not used as legal tender.

Signup and view all the flashcards

Bitcoin's Legal Tender Status

Bitcoin is a digital currency not controlled by a government, but El Salvador has declared it legal tender within its borders - a unique exception.

Signup and view all the flashcards

Digital Currency (CBDC)

A digital form of a country's currency, controlled by its central bank.

Signup and view all the flashcards

Demonetization

The act of withdrawing a currency unit from circulation, often to control inflation or prevent counterfeiting.

Signup and view all the flashcards

G-Sec (Government Security)

Debt instruments issued by the government to raise funds, often with a fixed interest rate.

Signup and view all the flashcards

T-Bill (Treasury Bill)

Short-term debt instruments issued by the government, typically with a maturity of less than one year.

Signup and view all the flashcards

Gresham's Law

The principle where 'bad' money (devalued or less valuable) tends to drive out 'good' money (more valuable) from circulation because people prefer to hold onto the 'good' money.

Signup and view all the flashcards

Soft Currency

A currency that is prone to depreciation and instability due to factors like high inflation, political instability, or weak economic fundamentals.

Signup and view all the flashcards

Hard Currency

A currency that is stable and has a strong demand in international markets, usually backed by a strong economy and a history of stable value.

Signup and view all the flashcards

Cheque

A written order instructing a bank to pay a specified sum of money from the drawer's account to the payee.

Signup and view all the flashcards

Demand Draft (DD)

A pre-printed, bank-issued instrument that guarantees payment of a specific amount of money to the payee upon demand.

Signup and view all the flashcards

IFSC Code

An 11-digit alphanumeric code that identifies a specific branch of a bank within the Indian Financial System. It's like a zip code for banks.

Signup and view all the flashcards

MICR Code

A 9-digit code printed on cheques in magnetic ink that allows automated processing and clearance of cheques.

Signup and view all the flashcards

Problems with Commodity Money

Commodity money has several weaknesses, including being perishable, not uniform in quality, prone to impurities, and difficult to use in international trade.

Signup and view all the flashcards

Debasement of Coins

The act of reducing the amount of precious metal in coins while maintaining the face value. This leads to a decrease in the value of the coin.

Signup and view all the flashcards

Tughlaq's Token Coin Experiment

In the 1330s, the Tughlaq dynasty experimented with token coins made of cheaper metal. However, this experiment was a failure due to various economic reasons.

Signup and view all the flashcards

Bank Money / Deposit Money

Money held in bank accounts. It exists as electronic entries in bank databases, not physical currency. It is created when a bank lends out money it has received as deposits.

Signup and view all the flashcards

Cryptocurrency

A form of digital currency that uses cryptography for security and is exchanged peer-to-peer without the need for banks or intermediaries.

Signup and view all the flashcards

UPI-Lite

A mobile-based, on-device wallet feature for UPI payments, allowing users to store small amounts of money for quick transactions. It is designed to be faster and more secure than traditional UPI transactions.

Signup and view all the flashcards

UPI-Lite Limits

UPI-Lite transactions have limits on the maximum amount per transaction (₹500), the total balance stored in the wallet (₹2,000), and the total transactions within 24 hours (₹4,000).

Signup and view all the flashcards

Benefits of UPI-Lite

UPI-Lite offers several benefits, including faster transaction speeds, reduced chances of failure due to network issues, and convenience for small-value payments.

Signup and view all the flashcards

NFC (Near Field Communication) in UPI-Lite

NFC technology allows for contactless payments by bringing a mobile device near a merchant's terminal. It enables offline transactions, making it particularly useful in areas with limited internet connectivity.

Signup and view all the flashcards

Conversational Payments in UPI

This feature enables users to make payments through AI-powered chat interfaces, allowing for a more conversational and user-friendly experience.

Signup and view all the flashcards

RBI's Role in UPI

The Reserve Bank of India (RBI) regulates digital payment technologies like UPI, ensuring their security and efficiency. It sets guidelines and approves new features like UPI-Lite and NFC integration.

Signup and view all the flashcards

UPI-Based Coin Vending Machine

A new technology using UPI to dispense coins from a vending machine, replacing traditional paper note insertion. Users can scan a QR code and transfer money from their bank account via UPI to receive coins.

Signup and view all the flashcards

NPCI

National Payments Corporation of India, an organization that develops and manages retail payments and settlements systems in India, including the UPI.

Signup and view all the flashcards

UPI BHIM

Bharat Interface for Money, a mobile-based payments system developed by NPCI. It allows bank-to-bank and peer-to-peer money transfers using a mobile phone.

Signup and view all the flashcards

USSD

Unstructured Supplementary Service Data, a technology that enables mobile phone transactions even on basic feature phones.

Signup and view all the flashcards

RuPay Card Payment Gateway

A payment gateway developed by NPCI, similar to Mastercard, Visa, and China's Union Pay, enabling card transactions.

Signup and view all the flashcards

RuPay's Advantages

RuPay charges lower fees compared to other international payment gateways.

Signup and view all the flashcards

RuPay's Channels

RuPay operates in three channels: ATM, Point of Sale (PoS) machines, and online portals.

Signup and view all the flashcards

RuPay's International Expansion

RuPay has partnerships with digital payments companies in countries like Singapore and Japan, enabling its usage in those regions.

Signup and view all the flashcards

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.

Digital Payment related Index / Competitions/Reports by RBI

  • 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).

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Quiz Team

Related Documents

Money: Barter to Bitcoins UPSC Prelims Notes PDF

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.

More Like This

Fiat Money Issuance and Governance Quiz
12 questions

Fiat Money Issuance and Governance Quiz

BoundlessMeter avatar
BoundlessMeter
Fiat Money Definition
5 questions

Fiat Money Definition

BrotherlyTelescope avatar
BrotherlyTelescope
Use Quizgecko on...
Browser
Open
Browser
Browser