Why Is Paper Money Important in our life and society.Money made of paper is called paper money. It consists of notes issued by the government or its Central Bank. Paper money is also called folding money. It is accepted in payment of goods or services, taxes and all public are private debts. The use of paper money has become very wide due to its many conveniences as a medium of exchange.
Why Is Paper Money Important In our Life And Society.
Paper money means the instruments such as bank notes, cheques, bills and other forms which take the place of money and act as money”.
Main Points of Definition
An instrument or document.
Acts as money.
No value in itself.
Its value stated on it.
Cheque, bank notes or postal order etc.
Why Is Paper Money Important;10 Advantages.
Paper money is preferred on metallic money on the following grounds:
1.Saving of Metallic Reserves:
Paper money is comparatively easy to issue. Practically, it costs nothing to Government. In order to issue metallic money, government needs to purchase gold or silver for minting coins. The loss, which may be from wear and tear of metallic money, is also avoided. The spare precious metals now may be used for other productive purposes yielding higher income.
- Elasticity:
Paper money due to its elasticity is very useful for the government. Supply of money can be expanded or contracted according to the needs of the economy. It also gives ease in controlling monetary matters to government.
3Low Cost:
The paper and printing cost of paper money as compared to its face value is much lower. In case of metallic money, there is excessive cost on mining, refining and minting coins. Considering this we can say that paper money is much economical.
- Stability:
The issuing authority regulates and supervises the issuance of paper money, which makes the monetary management easy. These regulations bring stability in the value of the currency. Moreover, the value of paper money is more stable than that of commodities.
- Easy Transfer:
Paper money can be transferred more cheaply, safely and easily from one place to another place than metallic money. Moreover, it can also be sent to others by post.
- Easy Counting:
Paper money is easier to count and takes little time than metallic money. It can be counted manually or by notes counting machines and piled up in bundles. Counting of large amounts in metal form is inconvenient and time consuming.
- Future Payments:
Future payments can easily be made with the help of paper money than coins. This fact is just due to stability in value of paper money.
- Easily Recognizable:
The paper money is easily recognizable. There is no botheration of testing the genuineness of the money material as it is required in the case of gold and silver coins.
- Uniform Quality:
Another advantage of paper money is that it has a uniform quality and the holder has least botheration for the possession of new and old money. It can be used many times by different persons without losing its value and validity.
- Useful in Emergency:
The paper money can be used in case of emergency like war and floods etc. The Government can meet expenses by printing notes in short period. But metallic money takes long time for issuance. So, paper money is a friend in peace and war.
- No Decrease in Value:
The metallic money depreciates or its value decreases due to wear and tear or repeated use. The issuance of paper money helps to control such loss because it can be used for many years.
- Better Usage for Reserves:
The paper money helps to use the metallic reserves for better productive purposes, which makes the economic development possible by providing the resources for proper use and benefit of mankind.
13.High Value in Small Bulk:
The paper money has less weight and high value than metallic money. The paper money has gained popularity due to its lightweight. The people do not feel any burden even for carry ing out large transactions.
14.Advantage to Banks:
Paper money has helped the banks and financial institutions to flourish rapidly. It is a root for the development of numerous credit instruments such as drafts and cheques etc. Moreover, the banks can keep their cash reserves in this form, because the currency notes are full legal tender.
15.Unlimited Legal Tender:
Paper currency is considered as unlimited legal tender. It can be used to discharge all kinds of business obligations or liabilities and no one can refuse to accept it in settlement of any claim.
- Convertibility:
The paper money is convenient to carry. It can be easily kept in pocket or wallets. Further, it is easily convertible into other credit instruments such as drafts, promissory notes, bills and cheques etc.
- No Imitation:
There are very less chances of fraud or imitation due to unique raw material and ink used in paper money. Besides, it is printed and designed in a very technical method.
- Record:
Paper currency or note is always numbered. So in case of a robbery or bank frauds, the involved persons can be found when they use the embezzled money.