History

• Cattle were once a medium of exchange.Cattle 5 image by Lee O'Dell from Fotolia.com
  
  Bank notes as a medium of exchange are relatively new historically. Any valuable commodity acted as money in the past, such as cattle, cowerie shells and leather. Their roles were all eventually replaced by bank notes. The first bank note was used in China in the ninth century.
  
  

Advantages of Bank Notes

• When compared with barter or other older forms of exchange, bank notes have several advantages. They store value efficiently, and can be carried around discreetly, unlike, say, a cow. These properties have played a crucial role in expanding trade.
  
  

Disadvantage of Bank Notes

• More bank notes, more inflationbusiness graph in action image by Andrea Massimiani from Fotolia.com
  
  Since it is easy to print bank notes, governments often finance their spending by printing new notes. Unrestrained printing leads to inflation, which hampers development of a nation by encouraging present consumption and discouraging future investment. In economics, this is considered a consequence of the Quantity Theory of Money. Bank notes, therefore, should be carefully supplied by any nation wanting stability and development.