2. What is Currency?
A currency in the most specific use of the word refers to money in
any form when in actual use or circulation, as a medium of
exchange, especially circulating paper money. This use is
synonymous with banknotes, or with banknotes plus
coins, meaning the physical tokens used for money by a
government.
A much more general use of the word currency is anything that is
used in any circumstances, as a medium of exchange.
3. Explanation of Case Study
Most people are surprised to learn
that Our economy has so much currency
because they carry far less than this in
their wallets.
Who is holding all this currency?
No one knows for sure, but there are two
plausible explanations.
4. Two Explanation
The first explanation is that much of the currency is being
held abroad.
In foreign countries without a stable monetary system, people
often prefer U.S. dollars to domestic assets.
It is, in fact, not unusual to see U.S. dollars being used overseas
as the medium of exchange, unit of account, and store of value.
5. Two Explanation
The second explanation is that
much of the currency is being held by
drug dealers, tax evaders, and
other criminals.
Not only can currency be lost or
stolen, but it also does not earn interest,
whereas a bank deposit does.
6. Why Do People Hold Currency?
For most people, the answer to this
question is simple:
“to make payments when neither
checks nor credit cards are convenient
or accepted.”
7. Why Do Foreigners Hold Currency?
In contrast to domestic demand, foreign demand for
the U.S. dollar owes more to the store-of-value
quality of money.
The dollar is preferred to many other currencies
because it is a relatively stable source of
purchasing power, widely accepted, and
reasonably secure from counterfeiting.
8. Trends in Foreign Holdings of U.S. Currency
Foreign demand for the U.S. dollar is particularly strong in
certain parts of the world.
For Example:
In African country many of the people prefer US dollar as a salary
in stead of African Shilling
9. Black Money
Black money refers to funds earned on the black
market, on which income and other taxes has not
been paid.
The spread of black money causes great losses for
the nation's treasurer. Listed here are most of the
alternative methods whereby black money can
make a difference to any nation's monetary and
societal development.
10. Conclusion
To these people, the dollar is a refuge during times of
political and economic uncertainty. Knowing
precisely how much currency is held outside the
United States, however, is no simple matter. Unlike
checking accounts, currency flows do not leave a
paper trail. However, informal reports to the Federal
Reserve and the U.S. Customs Department regarding
currency flows abroad do provide a rough indicator
of foreign demand.
