________ is the money which is accepted as a medium of exchange because of the trust between the payer and the payee. 

The correct answer is Fiduciary Money.

Key Points

• Fiduciary money is money that is accepted as a medium of exchange due to the trust that exists between the payer and the payee. 
• Cheques are fiduciary money as these are accepted as a means of payment on the basis of trust but not on the basis of any order of the government.
• Fiduciary money, or currency, refers to banknotes and coins in circulation in the economy.
• This is the liquidity available to economic sectors to carry out transactions.

Additional Information

• Credit money is the creation of monetary value through the establishment of future claims, obligations, or debts.
• Fiat money is a type of currency that is not backed by any commodity such as gold or silver. It is typically declared by a decree from the government to be legal tender. 
• Full-bodied money has a face value not in excess of its intrinsic value as a commodity.