Question

Q.1 Why is Indian Rupee accepted as the medium of exchange in India? (Any three reasons)


Q.2 Terms of credit of Informal sources of Credit are not favourable to borrowers. Explain the

statement with suitable examples.​

Answer 1

Answer:

1 (i) In India, the Reserve Bank of India issues currency notes on behalf of the central government.

(i) In India, the Reserve Bank of India issues currency notes on behalf of the central government.(ii) As per Indian law, no other individual or organisation is allowed to issue currency.

(i) In India, the Reserve Bank of India issues currency notes on behalf of the central government.(ii) As per Indian law, no other individual or organisation is allowed to issue currency.(iii) Moreover, the law legalises the use of rupee as a medium of payment that cannot be refused in settling transaction in India.

Answer 2

A1. Indian rupee is accepted as the medium of exchange in India
This is because:
(1) it is supplied by the reserve bank of India
(2)it is authorised by government
(3)law legalised that no other organisation is allowed to issue currency notes



A2. Terms of credit of informal sources of credit are not favourable to borrowers.
This is because:
(1) terms of credit involve interest-rate,collateral,documentation and mode of repayment
(2) in informal sources of credit the lender charges a higher rate of interest which is not favourable to the borrower