Civil Services Prep

Prelims 2018 · Economy · Question 46

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

  1. The money which is tendered in courts of law to defray the fee of legal cases
  2. The money which a creditor is under compulsion to accept in settlement of his claims
  3. The bank money in the form of cheques, drafts, bills of exchange etc.
  4. The metallic money in circulation in a country

Answer

The money which a creditor is under compulsion to accept in settlement of his claims

  • (a) Incorrect. Legal tender does not mean money used specifically in courts to pay legal fees.
  • (b) Correct. Legal tender money is money that a creditor is legally bound to accept in settlement of a debt or claim.
  • (c) Incorrect. Cheques, drafts and bills of exchange are credit instruments/bank money, not legal tender by themselves.
  • (d) Incorrect. Legal tender is not limited to metallic money; paper currency can also be legal tender.

Answer: (b)

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