knowledge about money

Danger of Over Issue:
As the supply of currency is elastic and is under the control of the Central there is a danger of over issuance. The over issuance can cause serious eo disturbances and can lead to drastic inf ^lion. The increase in-money supply also I increase in the volume of credit in the CLonomy. This may cause further disturbs the State Bank is not in a position to control credit potential of commercial banks
3. Demonetization:
Paper currency can any times be demonetized by the State. Under such does not remain legal tender and no body accepts it. As these notes have no • value, so they become completely useless.
4. Monetary Mismanagement:
Purchasing power of paper currency is volatile (meaning it evaporates) in This means though its face value remains constant but its purchasing power nx-due to any monetary mismanagement. Monetary mismanagement may lead to inflation which could be disastrous.
5. Price Instability:
Paper currency has given rise to wide scale price fluctuations in countries of world. The fluctuations in exchange rate market also produce scnouw on the general price level in the economy. Weak paper currencies fail to confidence of the people and cause price instability.
6. Limited to Country:
The use of paper currency is limited to its issuing country. Outside the a ceases to be a legal tender. So people have to exchange their currencies whe-abroad.
7. Loss Due to Fire or Water:
Although the paper currency is not affected by any apparent wear and of colour yet it can be damaged due to fire or water.
8. Uncertainty:
Paper currency has no value of its own. All the value it commands is its status as a legal tender. If however this status is ever lost the currency worthless. Apart from this the purchasing power held by the currency is also ei fluctuations. All these factors implies that there is a degree of uncertain!) currency.
Summing Up:
Paper currency is by far the most commonly used form of money in to< The basic reason of this is the ease with which it can be used and managed disadvantages of the paper currency are no doubt considerable but they can suppressed by effective monetary management