Question

Why do businesses accept paper currency when they know that, unlike a gold or silver coin, the paper the currency is printed on is worth very little?

Answer 1

Paper money is provided by governments around the world, and people use it to store the interest and purchase the things they need for their daily lives. Print money has value as its value is agreed upon by a large number of people and it is useful as a bartering device. Instead of exchanging goats, shells, or fruit, we now rely on paper money because almost everyone has a growing need.

Businesses usually accept paper currency even though they know the paper on which the currency is printed is worth very little because they know the paper currency is commonly accepted as a means of trade and if they accept paper currency in exchange for goods and services then they will also be able to make more transactions with them (e.g. factor payments) with ease and even this paper currency will not lose much value over the course of time they will hold it.