Because that paper money is backed by the gold reserves in Fort Knox. Have you ever had any gold coins? A handful is very heavy. As far as the numbers go ,it was decided long ago what the amounts would be.
The reason money is valuable is because it is used to store value of goods and services. It enables people to carry out their daily activities on level terms. It is the accepted standard for carrying out businesses. Learn more about the value of money at http://www.ehow.com/about_5437045_paper-money-valuable.html.
9 months ago
Last edited at 10:15AM on 6/11/2013
One of the functions of money is to be a "medium of exchange." If one has a real $20.00 bill (hence the special paper), one knows one can exchange it for something whose selling price is $20.00. The seller knows that he can then take that real bill and exchange it for something else that he wants to buy for $20.00. The $20.00 bill is not inherently "worth" anything. It's value is that it can facilitate transactions of various types.
In order to trade one thing for another a value of some sort must be placed on it. For example: one cow is worth ten chickens or two pigs. Or one wild pig is worth twenty conch shell beads. As societies advanced they went beyond barter and trade and established monetary systems instead. Values were established for that as well. Coinage in copper, silver, gold and other metals were used first and each govenment established a value for coins so people would know how much coinage was needed for a trade or 'purchase'. Then as people became more wealthy and wanted to more easily carry large amounts and coins became more expensive to make paper money was created and the govenment gave it values. And to maintain the values placed on the money it established protections on production of the money so there wouldnt be a glut that would devalue the money. As for why they chose 5, 10, 20, etc who knows. There was once 2$ bills as well but they were abolished in the US.