2.2 Money
Money
is the standard by which we measure the benefit found in the commodity and in
the effort i.e. goods and services. Therefore, money is defined as being the
medium by which all goods and services are measured. Hence the price of a
commodity and the wage of a worker for instance, each represents the society’s
estimate of the value of that commodity and the effort of that worker. Bonds,
shares and the like are not considered money. This estimation of the value of
goods and services is, in all countries, expressed by units. These units become
the measure by which the benefit obtained from a commodity and the benefit
obtained from a service is measured. These units would act as a medium of
exchange, and these units are money.
2.2.1 Metallic money
Economists
divide the types of metallic currencies in to two main types: the single
metallic standard and the dual metallic standard. The first is where the main
currencies are restricted to one single metallic coinage. As for the latter
i.e. the dual standard, both the gold and silver coins represent the main
currency.
The dual
metallic standard requires the existence of three qualities:
- Gold coins must have an unrestricted legal tender (no fixed purchasing power).
- There should be no restrictions on minting from the bullion of both metals.
- An official rate between the values of the gold and silver coins must be established.
The dual
metallic standard is characterized by the huge amount of money it puts into
circulation, due to the simultaneous use of the metallic coins as main
currencies. Therefore, prices remain high and this would lead to an increase in
production. This would also make the value of money more stable and prices would
be less likely to undergo major fluctuations which usually lead to economic
unrest. It is therefore clear that operating a dual metallic standard is better
than the single metallic standard.
For reading entire report go to Table of Content
For reading entire report go to Table of Content
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