Question

Why is Rupee accepted as a medium of exchange in India?

• A. Because it is issued by the Reserve Bank of India on behalf of the State Government.
• B. Because it is issued by the Reserve Bank of India on behalf of the Central Government.
• C. Because it is issued by the State Bank of India on behalf of the Central Government.
• D. Because it is issued by the Reserve Bank of India on behalf of the World Bank.

Hint:

Remember: \[ \boxed{\text{Currency Notes} \Rightarrow \text{Issued by RBI on behalf of Central Government}} \] This legal authority makes the rupee acceptable as a medium of exchange in India.

Answer 1

The Correct Option is B

Step 1: Think about what gives money its acceptability.
People accept the rupee for buying and selling not because it has value on its own, but because it carries legal backing from an authority everyone trusts.
Step 2: Identify who provides that backing.
In India, the Reserve Bank of India issues currency notes, and it does this on behalf of the Central Government, which gives the rupee its official, legal status as money.
Step 3: Rule out the other options.
It is not issued on behalf of any State Government, it is not the State Bank of India that issues currency, and the World Bank has no role at all in issuing Indian currency, so those options do not fit.
Step 4: State the final answer.
Hence, the rupee is accepted because it is issued by the Reserve Bank of India on behalf of the Central Government, which is option (B).