IAI Actuarial Core Principles · Business Economics · Role of money and interest rates in the economy
Which of the following is best described as fiat money?
A Reserve Bank of India banknote is fiat money. It is declared legal tender by the state and accepted because of that status and public confidence, not because of its intrinsic value or convertibility into a commodity such as gold.
- AA gold coin whose metal value equals its face value
- BA Reserve Bank of India banknote that is legal tender but has negligible intrinsic value and is not convertible into a commodityCorrect
- CA cheque drawn on a current account
- DA fixed deposit receipt issued by a bank
- A share certificate of a listed company
Explanation
Fiat money is money by government decree, with little intrinsic value and no commodity backing. The gold coin is commodity money. Cheques and deposit receipts are claims on bank deposits, not legal tender, and shares are not money.
Did you get it right without looking?
One question tells you little. A timed set on Role of money and interest rates in the economy shows your real accuracy, how long you take and where you lose marks.
More Role of money and interest rates in the economy questions
- A central bank wants to reduce inflationary pressure by using its main short-term policy instrument. Which action is most consistent with th…
- According to the market segmentation theory, what determines the yield at a particular maturity?
- Which development would most plausibly cause the Indian government bond yield curve to flatten, with long yields falling relative to short y…
- In the Fisher equation of exchange, MV = PT, which of the following statements best describes the classical quantity theory conclusion when …
- Under the pure expectations theory, the one-year spot rate is 6% per annum and the two-year spot rate is 7% per annum (annual compounding). …
- A household in Pune keeps its savings in a savings bank account so that its purchasing power can be carried to a later year, and it uses the…