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types/kinds of monetary standards
Transcript of types/kinds of monetary standards
design by Dóri Sirály for Prezi
A monetary standard refers to the set of monetary arrangements and institutions governing the supply of money.
This standard exists where the value of monetary units equal the value of specific amounts of commodity .
1.) Commodity Standard
* Legal tender, especially paper currency, authorized by a government but not based on or convertible into gold or silver.
i. It has little or no value within itself as a commodity.
ii. It is not redeemable in any commodity in quantity substantially equal value to its own stated value.
iii. Its purchasing power per unit is not maintained at par with that of any other commodity unit. Fiat money is usually a paper money or credit money.
When the value of monetary unit is fixed and maintained in terms of one standard metal only,
it is called monometallism. If the standard of money unit is gold the country is said to have a gold standard. If the unit of money is silver then it will be called silver standard.
Under silver standard the monetary
unit is given fixed quantity of silver and all other forms of money are maintained at par by making it convertible into silver at the fixed rate. Silver is allowed to move freely inside and outside the country.