Very Short Question and Answers - Modern Forms of Money

It is a system of exchange where goods and services are directly exchanged for other goods and services without using money.

Double coincidence of wants and lack of a common measure of value.

Early money included coins made of metals like gold, silver, and copper; they were heavy and inconvenient for large transactions.

Paper currency is money in the form of notes; in India, it is issued and regulated by the Reserve Bank of India (RBI).

Legal tender is money that, by law, must be accepted for payment of debts within a country.

Bank deposits are amounts kept in bank accounts like savings, current, or fixed deposits, recorded by the bank and withdrawable or transferable by the depositor.

They can be used to make payments through cheques, debit cards, ATMs, and electronic transfers without using physical cash.

A cheque is a written instruction to a bank to pay a specified amount from the drawer’s account. Example: Akash writes a cheque of ₹2,000 to Neha; her bank collects it and transfers funds from Akash’s account to Neha’s.

An ATM/debit card lets you withdraw cash from ATMs and pay at shops; the amount is directly deducted from your bank account.

They are electronic fund transfer systems: NEFT (batch transfers), RTGS (real-time large-value transfers), and IMPS (instant 24x7 transfers).

UPI (Unified Payments Interface) allows instant bank-to-bank transfers via mobile apps using a UPI ID or QR code without sharing account details.

Using a bank’s mobile app to access services like checking balance, transferring funds, and paying bills.

Accessing banking services through a bank’s website to transfer funds, pay bills, or view statements.

Digital wallets (like Paytm, Amazon Pay) store value digitally for payments; prepaid cards are loaded with a fixed amount and used like a card until the balance is spent.

A credit card lets you borrow up to a limit and repay later; a debit card uses your own bank balance and deducts instantly.

No. They are not legal tender in India and are not guaranteed by the government or RBI.

Paying a vegetable vendor ₹100 via UPI and paying school fees online via net banking.

The RBI authorizes currency notes; people accept them because they are legal tender backed by the authority of the central bank and the government.

Money acts as a common medium of exchange, so buyers can pay sellers using cash, deposits, or digital transfers without needing a direct exchange of goods.