Question

Distinguish between fiat money and bank money.

Answer 1

Sr. No.	Aspect	Fiat Money	Bank Money
1.	Meaning	Fiat money is currency that a government declares as legal tender. It has no real value but is accepted in transactions due to government regulations.	Bank money is defined as money maintained in bank accounts, primarily in the form of demand deposits. It can be used for a variety of transactions, including checks and electronic transfers.
2.	Form	Physical form such as paper currency and coins.	Electronic or paper-based forms, such as account balances, cheques, and digital transactions.
3.	Issuance	Issued by the government or central bank.	Created by commercial banks when they extend loans or accept deposits.
4.	Example	Currency notes and coins (e.g., Indian Rupee, US Dollar).	Demand deposits, cheques, and electronic balances in bank accounts.