Question

Which system fixes the maximum number of notes that can be issued by the government?

• A. Fixed Fiduciary System
• B. Proportional Reserve System
• C. Maximum Fiduciary System
• D. Minimum Reserve System

Answer 1

Answer:

C. Maximum Fiduciary System

Under the Maximum Fiduciary System, the government or central bank can issue currency up to a predetermined limit beyond which notes must be fully backed by government securities. This system ensures controlled issuance of currency while allowing some flexibility for fiduciary notes.