There is also two types of money which is commonly in use by people but we do not know the real cause of difference. And this difference is on the base of legality provided by the Govt. Keynes also classified money on the basis of its legality into legal-tender and non -legal tender money.
Legal tender Money – is that which the state and the people accept as the means of payment and in discharge of debts. Since it has the authority of the Govt. , such money is accepted compulsorily by the people. All notes and coins issued by the Govt. and the central bank of a country are compulsory Legal- Tender in that country.
Legal -Tender money is further divided into limited and unlimited legal money . All coins of the denominations of 1 paisa to 25 paisa are limited Legal -tender in India . Payments in them can be made up to a limit of Rs. 25 . On the other hand , all paper notes and coins of 50 paise and 1 Rupee are unlimited Legal Tender in India. People have to accept payments in unlimited quantities in these notes and coins.
Non -Legal Tender money – which does not possess any legal authority of the state or the central bank . Bank money in the form of cheques and bills of exchange , promissory notes etc is non – legal tender money . People are not bound to accept such money because there is no legal sanction behind their issue.————————————————————————————————————————————————————————————————The End.—————————————————————-