Physical currency in the form of paper or coins represents cash in a financial transaction. However, one wonders if the entry of new bills and coins represents additional cash moving in the economy.
Most of the notes that are printed are for the purpose of replacing damaged currency that is taken out of circulation and destroyed. Banks go to the Federal Reserve as in the case of the U.S. when the demand for cash rises and sends it back when they have more money than they need. The amount will then be added to the bank’s cash reserve where the pieces of paper will be replaced with electronic bits in the bank’s computer system.
