what was the drawback of introducing printed paper currency?
in chapter 3 of 9th class
Answers
Answer:
A serious drawback in paper currency is the ease with which it can be issued. There is always a danger of its over-issue when the Government is in financial difficulties. The temptation is too great to be resisted.
Answer:
Explanation:
Disadvantages of Paper Money:
But we cannot overlook the disadvantages of money:
(i) Paper money is of no value outside the country of issue. Gold and silver coins are accepted even by foreigners, as they have got some intrinsic value.
(ii) There is a possibility of the damage to paper. Fire may burn it; if the place is flooded, it is gone; it may also be eaten up by white ants.
(iii) A serious drawback in paper currency is the ease with which it can be issued. There is always a danger of its over-issue when the Government is in financial difficulties. The temptation is too great to be resisted. Once this course is adopted, however, it gathers momentum and leads to further note-printing, and this goes on till the paper currency loses all value. This happened in various countries in recent times: in Russia (1917), in Germany (1919), in China (1944), and so on.
(a) Prices rise steeply. As a result, labourers and people with fixed incomes suffer greatly. The whole public feels the pinch.
(b) The indirect result of the excessive rise in prices is a fall in exports and a rise in imports. This leads to the export of gold from the country, which is not a desirable thing. Its balance of payments becomes unfavorable.
(c) The rise in prices also leads to a fall in the external value of the home currency. The rate of exchange falls. More home money will have to be paid to buy units of foreign currencies.