Question

Explain the advantages and disadvantages of multi currency system.

Answer 1

Answer:

A great disadvantage of money is that its value does not remain constant which creates instability in the economy. Too much of money reduces its value and causes inflation (i.e., rise inprice level) and too little of moneyraises its valueand results in deflation (i.e., fall in price level).

Answer 2

The advantages and disadvantages of multi currency system:

Advantages:

• Encourages economic activities on the status of the economy

• Helps with consistency in the financial markets  

• Promotes lower interest rates

• Helps with an increase in exports

Disadvantages:

• Does not guarantee economic growth

• They are unstable and cannot be relied upon

• There is always a risk of hyperinflation

• They can hamper the imports

Explanation:

When the monetary policy of the country reduces the value of the national currency then it creates a level of uncertainty. The international purchasing becomes expensive which results in lesser imports in the country.  

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