It cannot be used as a legal tender. Definition of Money Supply. Legal Tender Money – This money cannot be denied in the settlement of the monetary obligation. 5. Money Supply can be defined as the money circulating in an economy.. As money supply is connected with ‘circulating money’, only the highly-liquid forms of money like currency and bank deposits are usually considered.. Money Supply is measured and expressed using different monetary aggregates like M1, M2, M3, M4 etc.. Issued by the Government. Fiat currency is legal tender whose value is backed by the government that issued it. First we take a look at Commodity money: examples, advantages, limitations and How the problem of uniformity and purity of gold nuggets leads to invention of metallic coin money. A digital way of money exchange. Easy to store and carry. Money: Evolution, Function, Types: Limited vs Unlimited Legal Tender, Fiat vs Fiduciary, Token vs Full Bodies, Debasement vs Demonetization. No one in their right mind is trading 5 oz of highly collectible silver bullion issued by the US Mint for a smaller legal tender cupronickel quarter (legally 25¢ in legal tender face value too, but merely a few pennies in de-based cupro-nickel melt value). Fiat money is a currency established as money by government regulation or law.It differs from commodity money and representative money. Inconvertible meaning it’s not backed by anything beyond government promises. Fiat money is inconvertible paper money made legal tender by a government decree. Real money is backed by something tangible and of value – generally a precious metal such as gold or silver. Created by the Computer. The #1 Free Online Courses and Education Portal. Terms like Narrow Money and Broad Money … 6. Takes up a lot of physical space. 2. Limited in supply. Gresham’s Law – Bad money drives out good money. The U.S. dollar is fiat money, as are the euro and many other major world currencies. FIAT MONEY. DIGITAL CURRENCY. Limited Legal Tender Money: It is compulsory to accept up to a certain limit; Example – A sum of 10 can be paid in denominations of 50 paisa coins and the recipient has to legally accept it. 4. Traditionally, currencies Forex Trading - How to Trade the Forex Market Forex trading allows users to capitalize on appreciation and depreciation of different currencies. Unlimited in supply. 3. Fiat currency is the money that the government of a country has established as a legal tender. Legal tender means that the money is backed by the full faith and credit of the government that issues it. On the contrary, Cryptocurrency refers to a decentralized and digital exchange medium, which uses encryption technique, to facilitate the transaction. What is Fiat Money? A fiat system is based on a government’s mandate that the paper currency it prints is legal tender for making financial transactions. Over the period of time, this money evolved in five stages : 1) Commodity Money 2) Metallic Money 3) Paper Money & legal tender 4)Bank Money 5) Crypto Currency. A physical way of money exchange. In other words, the government promises to be good for it. It can be used as a legal tender. Fiat money is a currency that lacks intrinsic value and is established as a legal tender by government regulation. 1.