Metallic money and paper money. Types of Monetary Standards: Metallic and Paper Standard 2022-10-23
Metallic money and paper money Rating:
Metallic money and paper money are both forms of currency that are used in various countries around the world. Both types of money have their own unique characteristics and have played important roles in the history of economics.
Metallic money refers to currency that is made out of a precious metal, such as gold or silver. This type of currency has been used for thousands of years and was once the primary form of money in many societies. The value of metallic money is based on the value of the metal it is made from, and it is generally accepted as a form of payment because of the inherent value of the metal.
One of the main advantages of metallic money is that it is a tangible asset. It has a physical presence, which can be reassuring to people who value the security and stability of a tangible asset. Additionally, metallic money is resistant to counterfeiting, which is a common problem with paper money. It is also durable, which means it can be used for long periods of time without losing its value.
However, there are also some disadvantages to using metallic money. One of the main drawbacks is that it can be heavy and inconvenient to carry around, especially in large amounts. Additionally, the value of metallic money is subject to fluctuations based on the market value of the metal it is made from. This means that the value of metallic money can change over time, which can be unsettling for people who rely on it as a store of value.
Paper money, on the other hand, is a type of currency that is made out of paper or other materials and is not backed by a physical asset like metallic money. Paper money is issued by a government or central bank and is used as a medium of exchange in transactions.
One of the main advantages of paper money is that it is lightweight and easy to carry around, which makes it convenient for daily transactions. It is also easier to produce than metallic money, which means that it can be more readily available when needed. Additionally, paper money is not subject to the fluctuations in value that can occur with metallic money.
However, paper money also has its own set of disadvantages. One of the main problems with paper money is that it is prone to counterfeiting, which can lead to economic instability if it is not properly managed. Additionally, paper money is not a tangible asset and does not have the same inherent value as metallic money. This can make it less appealing to people who value the stability of a tangible asset.
In conclusion, metallic money and paper money are both important forms of currency that have played important roles in the history of economics. Both types of money have their own unique characteristics and advantages, and both have their own set of disadvantages. Ultimately, the choice between metallic money and paper money depends on the specific needs and preferences of a society.
What is Paper Money in Economics
Demerits of Monometallism : The following are the demerits of monometallism: ADVERTISEMENTS: i. Fixed Parity Ratio: The applicability of the law requires that the intrinsically more valuable money must be relatively fixed by law in its parity with money. Metallic coins are comparatively less portable but more durable. If there is scarcity of bad money, both good and bad money will remain in circulation and the law will not operate. Thus, as far as the metal is concerned, gold is preferred to silver in most of the countries. Coins, paper currency and deposits are the components of money supply in India.
Ensures Full Employment and Economic Growth: Under paper standard, the government of a country is free to determine its monetary policy. The fluctuations in exchange rate market also produce serious effects on the general price level in the economy. It is also called fiat standard because paper money is inconvertible in gold and still regarded as full legal tender. ELASTICITY Paper money due to its elasticity is very useful for the government. It was developed before the development of paper money.
What is the difference between metallic base system and paper currency system?
Costly Standard: It is a costly standard and all countries, particularly the poor countries, cannot afford to adopt it. The money is issued on the written promise of the government. Poor countries cannot afford to adopt it. It refers to that money which is in the form of paper currency notes issued by the government of the country. Features of Monometallism : ADVERTISEMENTS: Essential features of monometallic standard are given below: i Standard coins are defined in terms of only one metal. Exchanging instability arises whenever external prices move more than domestic prices.
Monometallism: What is the definition of a metallic bond? If the government issues little more or little less currency than what is required for maintaining price stability, it may lead to cumulative inflation or cumulative deflation. Used as currency in the U. This paper money can cause over issue of notes. The quality of convertibility, which is basic to the currency principle, is no longer considered as necessary requirement for a good note issue system. ADVANTAGES TO BANK Paper money is of great advantage to banks. Durability Paper money is less durable.
Treatise on Metallic and Paper Money and Banks: Written for the Encyclopaedia...
In modern times, the establishment of International Monetary Fund IMF and the International Bank of Reconstruction and Development IBRD has been designed to give the ideal monetary system a practical shape. WHO issues metallic coins in India? Ideal Monetary System : An ideal monetary standard should be able to achieve the twin objectives of — a growth and full employment with reasonable price stability within the country, and b smooth flow of goods, services and capital at the international level. Conclusion: The main conclusion regarding the two principle of note issue is: i Both the currency principle and the banking principle fail to satisfy all the, requirements of a good note issue system. Metallic coins are comparatively less portable but more durable. A good note issue system should possess the following qualities: a It should inspire public confidence, and, for this, it must be based on sufficient reserves of gold and silver. Currently, there is an intensive process of transforming the education system in the country: a system of non-state higher education is developing, paid education and a range of educational services are expanding, new specialties are emerging, However, in connection with the signing by in 1997 of the Lisbon Convention on the recognition of qualifications relating to higher education in the European Region and the accession of our country in September 2003 to the Bologna process, it is relevant to identify the positive and negative aspects of the inevitable transformations in the educational system. The bad money silver will drive out good money gold from circulation.
Distinguish Between Paper Money and Metallic Coins
Elastic Money Supply: Since paper money is not linked with any metal, the government or the monetary authority can easily change the money supply to meet the industrial and trade requirements of the economy. No Price Stability: The argument that bimetallism ensures internal price stability and there will be an automatic adjustment between supply and demand for money is illusionary. After maintaining the minimum reserves, the monetary authority can issue any amount of currency that it feels necessary. Gradually, gold standard disappeared from different countries and finally it was completely abandoned by the world by 1936. After the general breakdown of gold standard in 1931, almost all the countries of the world shifted to the paper standard.
Distinguish between Metallic Money and Paper Money.
Suppose under bimetallism, one gold coin exchanges for 10 silver coins, i. Lacks Elasticity: Monometallism lacks elasticity. Maintenance of Bank Reserves: Under bimetallism, the maintenance of bank reserves becomes easy and economical. They specified legal tender, defining the type of payment that legally discharged a The first large-scale issue of paper money in a Western country occurred in France in the early 18th century. It is sufficient to keep only a certain percentage of total paper currency in the form of gold or silver reserves.
Metallic Money and Paper Currency Historically Contrasted by Young, John: Very Good Paper Wrappers (1909)
This would increase investment and hence production in the economy. Self-Operative: It makes the supply of money self-operative. Suitability They are more suitable for small transactions. Merits: The following are the merits of banking principle: i The banking principle renders note issue system elastic. Merits: Fixed fiduciary system has the following advantages: i It ensure convertibility of currency notes. If the monetary authority is not vigilant and does not issue the paper currency as required, it often leads to inflation deflation.
Distinguish between 'Paper money and Metallic coins'.
Point of difference Paper Money Metallic Money Definition It refers to that money which is in the form of paper currency notes issued by the government of the country. Costly Monetary Standard: Bimetallism is a costly monetary standard and all nations, particularly the poor nations, cannot afford to adopt it. Paper Standard : Paper standard refers to a monetary standard in which inconvertible paper money circulates as unlimited legal tender. Under the gold standard, there is no pre-established ratio between gold and silver, and the price of silver vis-a-vis gold essentially floats freely on the market. Features of Paper Standard : The paper standard has the following features: i Paper money paper notes and token coins circulates as standard money and accepted as unlimited legal tender in the discharge of obligations.
Distinguish Between the Following :Paper Money and Metallic Coins.
The standard coins possess a fixed weight and fineness of gold. CONVERTIBILITY Paper currency is easily convertible into other. Since there is no question of both metals becoming scarce simultaneously, money supply is more elastic under this system. Dangers of Inflation: Paper standard has a definite bias towards inflation because there is always a possibility of over- issue of currency. Operation of the Law : When both good and bad money together are in circulation as legal tender, good money disappears in three ways: i. Under Bimetallism: Under bimetallism generally a system of gold and silver coins , coins of overvalued metals are considered bad money and coins of under-valued metal as good money.