Monetary standard essay

Send email to admin eh. The monetary arrangements in use in America before the Revolution were extremely varied. Each colony had its own conventions, tender laws, and coin ratings, and each issued its own paper money.

Monetary standard essay

Monetary Policy Essay

There are three main types of monetary standards. Monometallism or Single Standard 2. Bimetallism or Double Standard 3. Paper Currency Standard Managed Currency Standard Monometallism or Single Standard When only on metal is adopted as the standard money and is made legal tender for all payments, the system is known as monometallism or single standard.

For example, now many countries have the Gold Standard. Suppose a country has adopted silver as the standard money, then it is said to have Silver Standard.

For example, England was on Silver Standard until Bimetallism or Double Standard If two metals are adopted as standard money and if a legal ratio is established between the value of the two metals, then the system known as bimetallism or double standard.

In other words, under this system, gold and silver circulated as legal tender money and there was a legally fixed ratio of exchange between them. Usually, two metals used under bimetallism are gold and silver.

Leave A Comment Owning gold will protect you from rising prices. Most people define inflation as rising prices.
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Bimetallism was adopted Monetary standard essay France in Later on, it was adopted by other countries like Belgium, Switzerland and Holland. Bimetallism has certain advantages and disadvantages.

Advantages It would secure greater stability of prices.

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It there is monometallism, the supply of only one metal could not satisfy the monetary demand satisfactorily. The increasing demand for money should be accompanied by an increase in the supply of money. Otherwise, there cannot be a stable price level.

Monetary standard essay

Therefore, if there is bimetallism, the supply of two metals put together will be steadier than that of any one of them. Just as two drunkards might walk more steadily when they walk hand in hand, the supply of two metals under bimetallism will make price level more stable.

Bimetallism would promote stable exchange rates between countries using gold and countries using silver. The supply of gold would not be sufficient for the currency requirements if all countries adopted gold standard, that is, if they adopted universal monometallism.

Bimetallism will keep world prices stable.

Money in the American Colonies

Disadvantages There is a great difficulty in maintaining the mint ratio legal ratio between the two metals because market ratio will often fluctuate. Bimetallism cannot work if only one country adopted it. All countries in the world should adopt it. It may result in a lot of confusion, particularly, if there are differences between the legal ratio and market ratio of the two metals.

Monometallism or Single Standard

So bimetallism may not remedy the defects of gold standard; it may increase the difficulties. Paper Currency Standard Managed Currency Standard Under the system, as the name indicates, the currency of the country will be in paper.

Paper money consists of bank notes and government notes. Generally, under the system, the currency system will be managed by the Central Bank of the country. Hence, the system sometimes is referred to as managed paper currency standard.

Almost all countries in the world have managed currency standard. The paper currency has certain advantages and disadvantages. Advantages and Disadvantages of Paper Money Paper money is economical. Its cost of production is negligible.

It is convenient to handle and it is easily portable. Its supply can be made elastic.What is Repo, Reverse repo,SLR,CRR,OMO, Quantitative & Qualitative tools of monetary policy?

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Monetary standard essay

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Halm defines monetary standard as the “principal method of regulating the quantity and the exchange value of standard money.” When the standard money of a country is chosen in the form of some metal, then the country is said to have metallic standard.

A monetary standard refers to the set of monetary arrangements and institutions governing the supply of money. It differs from the term “monetary regime” defined as a set of monetary arrangements and institutions accompanied by a set of expectations – expectations by the public with respect to policymaker actions and expectations by policymakers about the public's reaction to their actions.

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