Definition:

Currency is a legal tender, commonly used to facilitate trade and payments, that is officially sanctioned by a particular country. It is a medium of exchange that is used to pay for goods, services, and debts.

Key Features:

• Legal Tender: Currency is declared legal tender by the government of a country and is widely accepted as payment.
• Uniform and Legal: Currency has a uniform design and value throughout the country, ensuring consistency and fairness.
• Divisible: Currency is divisible into smaller units, such as coins or notes, to facilitate easier transactions.
• Durable: Currency is typically made of durable materials that can withstand repeated use.
• Limited Supply: Central banks control the supply of currency to regulate its value and prevent inflation.
• Unique Design: Each country has its own unique currency design, which distinguishes it from other countries.
• Symbol of National Identity: Currency can symbolize a country’s pride and national identity.
• Medium of Exchange: Currency serves as a medium of exchange, facilitating trade and payment transactions.

Types of Currency:

• Fiat Currency: Fiat currency is not backed by a physical commodity, such as gold, and is controlled by the central bank.
• Commodity Currency: Commodity currency is backed by a specific commodity, such as gold or silver.
• Cryptocurrency: Cryptocurrency is a digital currency that is not controlled by a central authority.

Examples of Currency:

• US Dollar
• Euro
• British Pound
• Japanese Yen
• Chinese Yuan

Importance:

• Facilitates Trade: Currency enables smooth and efficient trade by providing a common medium of exchange.
• Maintains Stability: Properly managed currency helps maintain economic stability and price predictability.
• Promotes Stability: A stable currency encourages investment and economic growth.
• Reflects Economic Strength: The value of a currency reflects a country’s economic strength and stability.
• Meets International obligations: Most countries have their own currency, which is essential for fulfilling international obligations.