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Tuesday, 22 November 2011

Advantages and disadvantages of paper money

PAPER MONEY :-
Mr. Hanson has defined the paper money in the following words, " Paper money means the paper instruments such as bank notes, cheques, bill and other forms which take the place of money and circulate as a medium of exchange.

On the following grounds paper money is preferred on metallic money.

ADVANTAGES OF PAPER MONEY :-
Following are the main advantages of paper money :

1. Portability :-
Notes are easily portable. It is very easy for making the payments in different placers and it is preferred than the metallic money.

2. High Value In Small Bulk :-
No any sort of money can be compared with our modern notes because its weight is minimum and value is high.

3. Economical In Cost :-
The printing of paper money is very quick, cheap, and economical as compared the metallic money.

4. Saving Of Precious Metals :-
The use of paper money has saved a lot of precious metals like gold and silver. The wear and tear of these metals also saved. The precious metals can be used for the productive purposes.

5. Easy In Counting :-
Paper currency can be counted more easily than coins. The counting of metallic money is a very difficult job.

6. Easily Recognizable :-
The paper money is easily recognizable. There is no botheration of testing the genuineness of the money material.

7. Uniform Quality :-
The paper money has another advantage that has a uniform quality and the holder least bothers for possession of new or old money.

8. Useful In Emergency :-
The government can increase its resources by printing of more notes and can meet its requirements.

9. Elastic Supply :-
The volume of paper money can be very easily expanded in accordance with the needs of the country. While the metallic money supply is in elastic.

10. Useful For Development :-
Paper or credit money is very useful for trade and industrial sector. If any person wants to establish factory or wants to import any commodity it facilities him.

11. Stability :-
The value of metalic money changes with the passage of time. But the paper money value remains stable because its weight can not reduce by using it.

12. Easy Payment :-
Through paper money you can make the payments in million rupees, easity. While it is very difficult to make such payments in metalic money.


DISADVANTAGES OF PAPER MONEY :-

1. Restricted Acceptability :-
The acceptance of paper money is limited upto the domestic country while other countries of the world are not ready to accept in case of payments.

2. Fluctuations In The Rate Of Exchange :-
In case of metallic money the value of domestic currency in terms of foreign currencies, rate of exchange remains stable while in case of paper money it remains fluctuating. The devaluation of one country also brings changes in the rate of exchange.

3. Demonetization Of Paper Money :-
If the Govt. demonetizes the paper money the paper holder will have a worthless pieces of paper in his hand.

4. Lack Of Durability :-
The paper money lacks the essential quality of durability of money. It can be easily destroyed, and then it will have no value.

5. Danger Of Inflation :-
The serious defect in paper money is that there is always danger of its over issue. Generally the less developing countries make the difficult budget and this deficit is met by the issuance of paper money. The price level rises and country faces the inflation.

6. Less Stability :-
There is less stability of value in paper money as compared to metallic money. Some times it is over issued and people loose confidence in the value of money and they keep their savings in terms of gold and silver.

No doubt paper currency has also some disadvantages but it is a fact that its advantages are more weighty.

4 comments:

Anonymous,  9 December 2013 at 21:39  

Thanks, It's good effort.

Anonymous,  18 February 2014 at 17:51  

Thanks for the help, but it needed more detail. It also repeated a lot.

Raja saqib 29 October 2016 at 08:36  

thankssssssssssssssssssssss

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