What are the Main Features of Paper Money?


The paper money has the following features:

(i) Paper money (paper notes and token coins) circulates as standard money and accepted as unlimited legal tender in the discharge of obligations.

(ii) The unit of money is not defined in terms of commodity.


(iii) The commodity value (or intrinsic value) of the circulating money is particularly nil.

(iv) Paper money is not convertible in any commodity or gold.

(v) The purchasing power of the monetary unit is not kept at par with any commodity (say gold).

(vi) Paper standard is national in character. There is no link between the different paper currency systems.


(vii) The foreign rate of exchange is determined on the basis of the parity of purchasing powers of the currencies of different countries.

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