Pros and Cons of Currency

Currency is money in any form when it is in use or circulation as a medium of exchange especially banknotes and coins. As currency mostly involves the use of money, then they are portable, durable, divisible, uniformity, limited supply and acceptability.

Money acts as a medium of exchange, measure of value, unit of account, the basis of credit. When it is used to intermediate the exchange of goods and services it performs the function of a medium of exchange.

Pros and Cons of Currency

Pros of Currency

  1. It is convenient

There are both paper and coin money. Paper money is the most convenient as a large sum of money can be carried from one to another hence someone can carry money to go and buy something from far away.

  1. Stability

The value of money can be stable for a long time especially paper money.

  1. Economical

It is very economical to produce paper money as the government does not require either gold or silver as in coins hence it saves the government a lot as most countries prefer paper money than coin money.

  1. Homogeneous

Currency is a very stable medium of exchange as the money is always the same hence it can be used everywhere by everyone.

  1. Easy to remit

It is very easy to use currency as the money can easily be remitted by everyone and at any place hence it is the commonly used medium of exchange.

  1. Easy to make payments through currency

It is easier for most people to make payments through currency as it does not require any process for the payment to be made.

  1. Elasticity

Money has got very high elastic power. Its quantity can either be increased or decreased at the will of the currency authority. This makes it a better requirement for trade and industries.

Cons of Currency

  1. Has no value outside the country of issue

When the money is used in another country, it will not be accepted hence it will have no value to be used in another country apart from the country where it was produced.

  1. Can easily be damaged

Money can easily be damaged by the user if not handled properly and this can make it useless after it has been damaged hence it is risky to carry money from one place to another.

  1. The risks of theft

Money can easily be stolen hence it is risky to carry money from one place another hence most people do not prefer to carry money from one place to another.

  1. Easily depreciates

When the currency depreciates, it leads to inflation of goods. This affects especially the traders who are involved in international trade.

  1. Instability

The value of money does not remain constant for a long period hence it affects the traders and other industries that commonly use money.

  1. Inequality of income

Money has divided the society into two halves. That is those that have a lot of money are regarded as rich and those who earn very little money are regarded as poor hence it is all as a result of the amount of money possessed.

  1. Black money

This is the money that people earn and hide and it makes them easy to avoid paying of taxes and this encourages the black market in the country.

  1. Political instability

The currency is affected by the change of the politics in a country which may be caused by the increase in the cost of essential commodities hence people will have to spend a lot of money on the goods.

Summary

Currency is not encouraged to be used by people as it has got a lot of problems associated with it hence most people are encouraged to use cashless services such as the use of credit cards and mobile banking.

Leave a Comment