Assertion: Money act as a medium of exchange.
Reason: Law legalizes the use of money as a medium of exchange.
a)
Both A and R are true and R is the correct explanation of A.
b)
Both A and R are true but R is not the correct explanation of A.
c)
A is correct but R is wrong
d)
A is wrong but R is correct
Correct answer is option 'A'. Can you explain this answer?

Question

Assertion: Money act as a medium of exchange.
Reason: Law legalizes the use of money as a medium of exchange.

a)
Both A and R are true and R is the correct explanation of A.
b)
Both A and R are true but R is not the correct explanation of A.
c)
A is correct but R is wrong
d)
A is wrong but R is correct

Correct answer is option 'A'. Can you explain this answer?

Answer

Money acts as a medium of exchange in the following ways : (i) Overcomes the problem of double co-incidence of wants. For example, if a person needs wheat in exchange of tea, then he/she must search for a person who is ready to trade wheat for tea. Money made the need for such searches redundant. (ii) Acts as a medium of deferred payment. (iii) Has a store value.

Answer

(i) It is accepted as a medium of exchange because the currency is authorised by the government of the country.

(ii) In India, the Reserve Bank of India issues currency notes on behalf of the Central Government.

(iii) As per Indian law, no other individual or organisation is allowed to issue currency.

(iv) Moreover, the law legalises the use of rupee as a medium of payment that cannot be refused in settling transactions in India.

(v) No individual in India can legally refuse a payment made in rupees. Hence this rupee is widely accepted as a medium of exchange

Answer

Both are true(assertion and reason)

Answer

Assertion: Money acts as a medium of exchange.

Reason: Law legalizes the use of money as a medium of exchange.

Explanation:

Money as a Medium of Exchange:
- Money serves as a medium of exchange, facilitating the exchange of goods and services between individuals.
- With the use of money, people can easily trade and acquire the goods and services they need.
- The exchange process becomes much simpler when money is used in transactions.

Reasoning behind the Assertion:
- The assertion is true because money is widely accepted as a medium of exchange in most societies.
- People trust that the money they receive can be used to purchase goods and services from other individuals or businesses.
- Money acts as a common denominator, enabling people to compare the values of different goods and services.

Reasoning behind the Reason:
- The reason provided is also true because the use of money as a medium of exchange is legalized by law.
- Governments establish legal tender laws that define the official currency of the country and require its acceptance for the settlement of debts.
- The legal system enforces the use of money as a medium of exchange, ensuring that individuals and businesses accept it as a form of payment.

Explanation of why Reason is the correct explanation of Assertion:
- The reason is the correct explanation of the assertion because the legalization of money as a medium of exchange is what provides it with its widespread acceptance and usability.
- Without legal backing, people would not be obliged to accept money in exchange for goods and services.
- The law establishes the framework for trust and confidence in money as a reliable medium of exchange.

Conclusion:
- Both the assertion and reason are true, and the reason correctly explains why money acts as a medium of exchange.
- Money's acceptance and usability are made possible by the legal framework established by the government, ensuring that people accept it as a means of trade.

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