Paper Currency

Paper Currency
Paper currency is the most advanced form of money. It fulfils nearly all the characteristics of an ideal money. It is economical, easily recognisable, stable and conveniently storable.
Paper currency (as already explained previously) can be classified into representative, convertible and fiat money.
Now a days almost majority of the paper currency is fiat money. In words of Keynes:
"Fiat money is one which is created and issued by state but is not convertible by law into anything other than itself and has no fixed value in terms of an objective standard."
Other definitions of the paper currency are as follows: According to Hanson:
"Paper money means the paper instruments such as bank notes, cheque, bills, and other forms which act as a currency"
According to F. Perry:
"Paper money is a document representing money such as bank notes, promissory notes, bills of exchange, etc
Thus paper currency is in convertible but at the same time it is unlimited legal tender. Following are the advantages and disadvantages of paper currency.
Advantages:
1. Economical:
Paper currency is very economical to issue. The cost of currency as compared to its face value is very low. Printing of paper currency requires certain special type of paper, ink and printing technology. These tilings are no doubt costly but the overall cost of printing paper currency is quite low.