Straightforward Legal Tender


Legal tender: It is that money which is officially appointed by the government as an adequate instrument for the fulfilment of obligations stated to be collectible in domestic money. A creditor has no legal right to reject an offer of legal tender money by a debtor in fulfillment of a general monetary obligation. Governments declare certain kinds of money in circulation to be legal tender or legal means of payment with the dual purpose of increasing their acceptability and clarifying the legal situation of debtor and creditor in discharging obligations calling for money payments.

Legal tender money is further classified as limited legal tender and unlimited legal tender depending upon the degree or extent to which money pieces of different denomination in circulation are legally acceptable. Subsidiary coins of smaller denominations are legal tender for only limited amounts. Standard coins and currency notes of varying denominations, on the other side, are unlimited legal tender. Go to the following site; read full story.

Yes, those bills are legal tender because those guys in Washington passed a law stating they must be accepted for payment. They are Federal Reserve Notes and it states right on the bill,' This is legal tender for all debts, public and private'. That is OK, but if you go to the U. S. Mint will they redeem it in gold or silver? Years ago they did, but not since 1971.

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Optional money is that money which is ordinary accepted by the people in final payments; but has no legal sanction behind it. Credit instruments like cheques, drafts, bills of exchange, promissory notes etc. are optional money. No one can be obliged to accept them; but they're generally accepted because people have faith in the credit of the paper. Optional money is also known as credit money. Robertson has called legal tender money as common money and optional money as bank money. In case you're serious about this topic, check into;

As stated earlier, in the advanced economies particularly credit money constitutes the greater part of the money stock in the possession of the public. It should be clearly understood that legal tender powers may increase the acceptability of a money to some degree. However, the grant of such powers is not a necessary nor a firm assurance of acceptability.

Money paper: It is likewise called as the actual money and it's that money which circulates in a country as a means of exchange. It is the form of money under which the price contracts and debt contracts are discharged. General purchasing power is stored in the area of money proper. Berham calls it unit of currency and Seligman refers to it as actual money.

Keynes has further classified money proper into commodity money and representative money. Commodity money is made up of some commodity chosen as money. It is full bodied money or standard money. Representative money circulates in the form of cheap metallic coins or convertible paper notes. It draws importance from the main or the commodity money which it represents. Representative money may either be representative full bodied money or representative token money.

Money of account: It is the month in which debts and prices and general purchasing power are expressed. It is that form of money under which the accounts are maintained as well as the value is measured. According to Keynes, money of account is the description or title, while actual money is the thing which answers the description. Benham has called money of account as a unit of account and Seligman considers it as ideal money. Since it is merely a title of the thing used as money, it isn't subject to evolutionary change. It is static in character. Rupee has been used as the money of account ever since the introduction of monetary system although the money material representing rupee has changed over time, for instance.

Under normal conditions the items which serve as means of payment or money proper are uniquely linked to the abstract unit of account. They are expressed or defined in the area of that abstract entity as fixed fractions or multiples. Money, being defined in the area of the unit of account, always has an invariable price in the area of that unit.

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