What does the term 'legal tender' refer to?

The term 'legal tender' specifically refers to the currency that must be accepted if offered in payment of a debt. This means that when a debtor offers legal tender in order to settle a financial obligation, the creditor is obligated to accept it. Legal tender includes the official currency of a country as sanctioned by its government, which is designed to facilitate transactions and ensure a stable and reliable medium of exchange within the economy.

In most jurisdictions, the government's designated currency, which can include both coins and banknotes, functions as legal tender, making it unlawful for creditors to refuse payment in this form. This principle helps to establish trust in the monetary system, providing assurance that the currency holds value and can be utilized universally to settle debts.

The other options do not align with the definition of legal tender. Currencies that are rarely accepted are not considered legal tender because they do not fulfill the requirement to be universally accepted for debt payments. Similarly, legal tender is not limited only to physical coins and bills, as digital or virtual currencies issued by a central authority can also fall under this category in certain modern economies. Finally, legal tender does not pertain exclusively to currencies used in international trade; it is applicable within a country’s borders for all transactions involving debts.