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Monetary Management:
As the supply of paper currency can be regulated by central bank thus monetary management becomes easy. The volume of currency in circulation can be easily kept under observation by the Central Bank. The Central Bank can use its monetary powers to influence the supply of currency and credit in the economy.
11. Record:
Paper currency is always numbered. Each note has a distinct number. So in case of a robbery or bank frauds, the involved people can be traced out when they use the embezzled money.
12. Ease of Counting:
The paper money can be easily counted and piled up in bundles. It can be counted either manually or by specialised currency counting machines. These machines can also detect any fake currency note while counting.
13. Convertibility:
Paper currency is easily convertible into other credit instruments such as drafts, promissory notes, bills etc
14. Saving in the Use of Metal:
Paper currency indirectly leads to the saving in the metallic reserves of the country. Due to the issuance of paper currency there is no need to issue coins in greater value. Thus metal is saved and can be used for other more useful purposes.
15. Ease of Issuance:
The paper currency is easy to issue and administer. There are different methods for the issuance of paper currency which can be altered to meet the typical requirements of any economy. The method of issuance can also be changed in response to changes in the pattern of economy.
Disadvantages: 1. Inflation:
The major disadvantages of paper currency is that it is exposed to inflation. The
face value remains unchanged but the purchasing power declines. This has made people
suspicious about its validity. The problem of inflation is mainly faced by under developed
countries. In such countries people try to hold savings in the form of forejgn currencies
just as we people cherish to hold dollars. This further leads to business of speculation in
the economy. People try to make easy money by taking advantage of the fluctuations in
the exchange rates