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Currency Is, Know the Definition to the Weaknesses and Strengths

Currency is considered as one of the legal instruments of payment.

Currency, in the form of banknotes or coins, is money issued by the central bank and can be used by the public as a legal means of payment in day-to-day buying and selling transactions.

The money used in society today is divided into two types: currency and demand deposits. Currency has various types and functions, so let's learn more about this means of payment.

Definition of Currency

What is currency? Money issued by the Central Bank of a country and regulated by the laws of that country is known as currency. Paper money and coins are two types of currency in Indonesia. In addition, this money can be used as a medium of global trade exchange or as a means of foreign currency transactions.

In other words, currency is a legal means of exchange and payment that people use for various kinds of transactions in everyday life.

Types of Currency

According to Bank Indonesia Basic Law No. 11 of 1953, there are two types of currency: State Money, which is money issued by the government and made of plastic; and Bank Money, which is money issued by the Central Bank and made of paper and metal.

Coins are money made of gold or silver that is formed in such a way. On the other hand, banknotes are money made from special paper materials with special images and stamps and are used as legal tender.

Metal value has two types of value: intrinsic value, or the value of the materials used to make money, and exchange value, or the value that can be exchanged for other goods.

Currency Functions

Functions of Currency: Below are some functions that you should know about currency.

  1. As a means of payment

One of the main functions of currency is to serve as legal tender for transactions, enabling people to buy the things they need using this money.

  1. As a tool that protects value

The community can also save and use currency as a medium of exchange when it is collected.

  1. As a Measure of Value

Finally, currency serves as a standard for measuring the value of goods or services. As a result, currency becomes the benchmark in trade transactions for negotiating prices and determining profit and loss.

Advantages and Disadvantages of Currency

The first advantage of paper money is its unique design, which makes it easy to carry with you during your daily activities, such as storing it in your wallet or clothes pocket.

However, if you are short on banknotes, you should be careful because banknotes can be damaged or lost, and people often launder money that is still in their clothing pockets.

In addition, paper money has a high face value compared to coins, which is another advantage over other currencies. However, keep in mind that if the banknote is damaged, the holder will incur a loss.

Paper money, on the other hand, is made of metal, making it more resistant to damage. However, as we know, coins have a smaller face value than paper money, so they are heavier and more difficult to carry.

This is information about currency from its meaning, types, functions, to its advantages and disadvantages. Hope it is useful!

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