Correct Answer: Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)

Solution : The correct answer is (a) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).

Assertion is true because the value of currency notes is not derived from the physical material they are made of but from the trust and belief placed in them by the public. The actual value of the currency notes is often much lower than the face value printed on them, as the cost of printing is usually significantly less than the value they represent. However, despite this, currency notes are generally accepted in transactions because of the confidence and trust placed in the issuing authority.

Reason is the correct explanation of Assertion (A). Currency notes derive their value and acceptance from the legal promise made by the central bank and the central government that they will be accepted as a medium of exchange and can be redeemed for goods, services, or other forms of value. The backing and guarantee provided by the central bank and the central government instill confidence in the public, ensuring the general acceptance of currency notes.

Therefore, both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).