Why currency is accepted as a medium of exchange?


(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.

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