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What are the modern forms of money? Why the rupee is widely accepted as a medium of exchange?

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Anything that is acceptable as a medium of exchange and even the means of payment for the settlement of debts can be considered as money. The money as we see today has been the result of a long evolution process. In today's world, modern money consists of the following:

  • Currency notes and coins: This is the modern form of money that is being used across the world. The precious metals and coins that were used in the early periods were inconvenient to be carried in large quantities. In place of this, paper currency was introduced that gave the convenience of the transaction to the users. They could carry large amounts in the form of currency notes. In the modern currency system, the currency notes and coins are issued by the central bank that is the apex monetary authority of the country. No one has the authority to reject the money that is being circulated by the central bank. Thus this became the most convenient method of conducting transactions and exchanges.
  • Deposits with banks: Commercial bank accepts various types of deposits from the public. These deposits are payable after a certain time period. There are different types of deposits that are accepted by the commercial banks like demand deposits, savings deposit, current account deposit, permanent deposit and recurring deposit. Out of this, demand deposit is considered to be a form of money. Demand deposits can be withdrawn by the user as and when the amount is required without any restrictions using cheques. Thus it is also considered as a modern form of money.
  • Plastic money and e-money: This developed with the development of internet facilities. Plastic money consists of debit cards, credit cards and other facilities. The users can carry them instead of carrying currency. A debit card allows the user to withdraw money from the account while credit card allows the user to overdraw beyond the account holder's balances. The expansion of the internet has also paved the way for the development of e-wallets like PayTm, Google Pay and other services through which transactions can be carried out.

In India, the rupee is widely accepted as a medium of exchange because of the authentication of the Reserve Bank of India (RBI). RBI plays an essential role in printing currencies. There is no other authority that has the power to issue and circulate the currency. It is the law that legalizes the use of rupee as a medium of exchange anywhere in India. No person can refuse the Rupee for the transaction. If Rupee is refused by anyone, they can be sued by law. Therefore it is the law that makes the rupee as a widely accepted as a medium of exchange in the country.

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