What is the rationale behind why one is ready to hold a ten rupee coin?
Its value is backed by the issuing authority.
Understanding the Value of a Ten Rupee Coin
The question asks why people are willing to accept and hold a ten rupee coin. To understand this, we need to look at what gives money its value in a modern economy.
In most modern monetary systems, the value of currency, whether coins or paper notes, is not primarily based on the material it is made from (its intrinsic value) but on something else entirely.
Analyzing the Options
Let's examine each option in the context of what gives currency value:
- Option 1: Its intrinsic value is greater than Rs. 10.
This is generally incorrect for modern coinage. The metallic value (intrinsic value) of a ten rupee coin is almost always significantly less than its face value of Rs. 10. If the intrinsic value were higher, people would melt the coins down for their metal content, which would defeat their purpose as currency.
- Option 2: It can be melted to extract metal worth Rs. 10 out of it.
Similar to option 1, the metal content of a ten rupee coin is not worth Rs. 10. Melting currency is also typically illegal.
- Option 4: It is finely and artistically minted.
While the design and quality of minting are important for security and aesthetics, they do not determine the economic value of the coin. An artistically pleasing coin is still only worth its face value in exchange, unless it has numismatic value (value to collectors), which is not the basis for its general acceptance as currency.
- Option 3: Its value is backed by the issuing authority.
This option correctly identifies the primary reason for the value of modern currency. The value of a ten rupee coin is derived from the fact that it is declared legal tender by the government or central bank (the issuing authority). This means it is universally accepted within the country for the payment of goods, services, and debts. The government's backing creates trust and confidence in the currency, ensuring its circulation and acceptance.
The Concept of Fiat Money and Government Backing
The ten rupee coin, like most modern currencies, is a form of fiat money. Fiat money is currency that is not backed by a physical commodity (like gold or silver) but by the government that issued it. Its value comes from the public's trust that the government will maintain its stability and that it will be accepted as a medium of exchange.
The issuing authority (like the Reserve Bank of India in the case of the Indian Rupee) manages the supply of currency and implements monetary policies to keep its value relatively stable. This backing and management by the authority are what make people confident in accepting the ten rupee coin at its face value.
Why People Accept a Ten Rupee Coin
In summary, people are ready to hold and use a ten rupee coin because:
- It is legal tender.
- Its value is guaranteed by the issuing authority (the government/central bank).
- There is public confidence that it will be accepted by others for transactions.
- Its value is its face value, not its intrinsic material value.
Therefore, the core reason for the acceptance of a ten rupee coin is the backing and guarantee provided by the issuing authority.
| Basis of Value | Modern Fiat Currency (e.g., ₹10 coin) | Commodity Money (Historical) |
|---|---|---|
| Primary Source of Value | Issuing Authority's backing and public trust | Intrinsic value of the material (e.g., gold, silver) |
| Relationship: Intrinsic vs. Face Value | Intrinsic value < Face value | Intrinsic value ≈ Face value |
| Risk if Backing Fails | Value significantly diminishes | Still holds value as a commodity |
Revision Table: Ten Rupee Coin Value Rationale
Let's quickly review the key concepts related to the value of a ten rupee coin.
- Fiat Money: Currency whose value is not based on a physical commodity but is declared legal tender by the government.
- Issuing Authority: The government or central bank responsible for printing/minting currency and managing its value.
- Legal Tender: Currency that must be accepted as payment for debts.
- Intrinsic Value: The value of the material the currency is made from. For modern coins, this is usually less than the face value.
- Face Value: The value printed or stamped on the currency (e.g., ₹10).
Additional Information: Trust and the Monetary System
The value of currency is fundamentally built on trust. Trust that the issuing authority will manage the economy responsibly, trust that the currency will hold its purchasing power over time (remain relatively stable in value), and trust that everyone else in the economy will also accept this currency as payment.
If people lose trust in the issuing authority or its ability to manage the currency, the value of the currency can collapse, leading to hyperinflation or a shift towards other forms of value storage or exchange.
The fact that a ten rupee coin is universally accepted across India for transactions is a testament to the trust in the issuing authority and the stability of the Indian monetary system.
Important Questions from Miscellaneous
A stone is thrown horizontally from the top of a 20 m high building with a speed of 12 m/s. It hits the ground at a distance R from the building. Taking g = 10 m/s2 and neglecting air resistance will give :
A sphere of volume V is made of a material with lower density than water. While on Earth, it floats on water with its volume f1V (f1 < 1) submerged. On the other hand, on a spaceship accelerating with acceleration a < g (g is the acceleration due to gravity on Earth) in outer space, its submerged volume in water is f2V. Then:
A railway wagon (open at the top) of mass M1 is moving with speed v1 along a straight track. As a result of rain, after some time it gets partially filled with water so that the mass of the wagon becomes M2 and speed becomes v2. Taking the rain to be falling vertically and the water stationery inside the wagon, the relation between the two speeds v1 and v2 is :
Consider the following statements:
1. Distance between the longitudes becomes zero on North Pole and South Pole.
2. Distance between the longitudes is maximum on the Equator.
3. Number of longitudes is more than number of latitudes.
Which of the statements given above is/are correct?
One block of 2⋅0 kg mass is placed on top of another block of 3⋅0 kg mass. The coefficient of static friction between the two blocks is 0⋅2. The bottom block is pulled with a horizontal force F such that both the blocks move together without slipping. Taking acceleration due to gravity as 10 m/s2, the maximum value of the frictional force is :
