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Advantages of paper money
1. It is economical particularly to the government for it cost very little to print.
2. Its elastic for its supply can be changed with demand, can be increased or decreased at the will of monetary authority through the central bank.
3. It can be remitted from one place to another cheaply with an insurance cover.
4. The value of money can be kept stable by regulating its issue. This is done through controlling the money so as to reduce inflationary pressure.
5. Its convenient for a large amount can be carried without anybody knowing particularly the value of the currency.
6. Banks are able to transact huge businesses using the paper money
Disadvantages of using paper money
1. Paper money might not be of any value outside the country.
2. There is danger of easy destruction by flood, fire or theft.
3. There is temptation of government over-issuing the currency which may lead to inflation hence leading to:
a) Price rising heavily – implying workers and other people with fixed income suffer greatly.
b) Lead to a fall in export.
c) Loss of external value of the home currency.
d) More home currency notes will be paid to buy a unit of foreign currency
Wilfykil answered the question on March 8, 2019 at 10:20
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