Paper Money: Advantages And Disadvantages

The use of paper money had marked the beginning of a crucial stage in the evolution of money. The practice of using paper money started during the 17th and 18th centuries. Since then, it has come a long way and has now got accepted as the ideal form of money all over the world.

How did paper money get introduced?

Metals are costlier than paper. Hence, merchants used to carry paper receipts instead of metallic money. With the passage of time, the scarcity of metals made the authorities introduce paper currency. That was the beginning of paper currency and it has continued as a medium of exchange till this date.

What are the advantages of paper money?

  1. It is economical

Paper is much cheaper than metal. Hence, the cost of introducing and circulating new currencies in the market is very less as compared to metal coins.

  1. It is convenient

Carrying paper money is really convenient when compared to carrying metallic coins. Since paper is lighter than metal, you can carry more money with you wherever you go.

  1. Easy to store

While metal coins needed a larger storage space, you can store paper currency quite easily in a small vault.

  1. Elasticity

One of the best things about paper money is its elasticity. It is better suited to meet the requirements of the booming economic industry than metallic coins.

What are the disadvantages of paper money?

  1. Over-issue of currency notes

Changes in the money supply are decided and implemented by the government. Because of this, there is a risk of over-supply of currency notes which can lead to an inflationary environment in the country.

  1. Less durable

One of the things that make paper money less valuable is its durability factor. Paper money is less durable than metallic coins.

  1. No value outside the country of issue

Paper currency is acceptable only within the country of origin.

  1. Lack of stability

There is a lack of stability in the value of paper currency as it is liable to quick changes.

  1. Threat of demonetisation

Paper currency notes have no value once they are demonetized.

These were some of the advantages and disadvantages of paper currency. Today almost every nation has its own form of currency. The currencies of each country have different values. While some countries have high-value and global currencies like the US Dollar and Euro, there are countries like Vietnam and Iran which have the lowest currency in the world.

Click on the link to learn about the lowest currency in the world.

Also, check out these countries that do not have their own currency.

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