Advantages of Paper Money

Paper money is more convenient to handle. The transaction of business in modern times involves huge sums of money. If metallic money is to be carried over long distance and in large quantities, it presents a number of difficulties. However, all such inconveniences are overcome by the use of paper money

Paper money helps in economizing the use of precious metals. Gold and silver which is required for minting metallic money can be used for some other purpose, while the business is being conducted with the paper money.

Paper money can be issue by the government without incurring much cost. The cost of minting metallic money is rather high because of the expenses to be made in minting, transporting and refining the precious metals. On the other hand, what is required for the issue of paper money is ink and paper. Thus, notes worth millions of dollar can be issued without much of expenditure.

Paper money avoids the waste of precious metals which would have occurred through wear and tear in handling the metallic money. The cost of making paper money being negligible, more of notes can be issued to replace the old paper notes when they become unfit for further use.

Paper money is highly elastic. Government can overcome the finical stringency by issuing more of paper currency. But the issue of metallic money is possible only when more of metals are obtained. Hence, the limited availability of precious metal places a limit on the issue of metallic currency, thereby making it inelastic.