Question

what are the difficulties of paper money

Answer 1

cons.
1 very easily outbreak.
2 Paper money has less durability than metallic coins.

Answer 2

Paper money has following difficulties/disadvantages:-

1.Restricted Acceptability :-

The acceptance of paper money is limited upto the domestic country while other countries of the world are not ready to accept in case of payments.

2. Fluctuations In The Rate Of Exchange :-

In case of metallic money the value of domestic currency in terms of foreign currencies, rate of exchange remains stable while in case of paper money it remains fluctuating. The devaluation of one country also brings changes in the rate of exchange.

3. Demonetization Of Paper Money :-

If the Govt. demonetizes the paper money the paper holder will have a worthless pieces of paper in his hand.

4. Lack Of Durability :-

The paper money lacks the essential quality of durability of money. It can be easily destroyed, and then it will have no value.

5. Danger Of Inflation :-

The serious defect in paper money is that there is always danger of its over issue. Generally the less developing countries make the difficult budget and this deficit is met by the issuance of paper money. The price level rises and country faces the inflation.

6. Less Stability :-

There is less stability of value in paper money as compared to metallic money. Some times it is over issued and people loose confidence in the value of money and they keep their savings in terms of gold and silver.

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