Paper money is said to be convertible when the issuing authority taken upon itself the responsibility of converting it into gold or standard money. The issuing authority, however, does not keep an equal value of precious metals in its vaults, for, all the notes are ordinary not presented for conversion at the same time. This is also known as Fiduciary paper money.
Paper money is said to be inconvertible when it cannot be got converted into gold or standard money. This type of paper currency is acceptable only through the command of the government.
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