Saturday, August 11, 2012

Class XI, Principles of Economics, "Bi Metallism"

Bi Metallism


Bimetallism is a system of currency under which the price of the monitory unit is regulated with reference to any two metals (generally gold and silver). Both the metals act as a medium of exchange and the standard of value. The two metals remain in circulation side by side. The ratio between their values is fixed and maintained by the currency issuing authority.

Essential Features

The essential features of bimetallism are:

1. Standard coins of two metals, generally gold and silver remain in circulation side by side.

2. Coins of each of the metals remain unlimited legal tender.

3. Generally free coinage of both metals is considered as legal and allowed. But some times free coinage of only one metal is allowed. If it is so then the system is called limping standard.

4. There is a fixed legal ratio of exchange between the two metals e.g. if an American silver coin has 16 g. of silver for every gram of gold in gold coins, the ratio of exchange between the two would be 16:1. Any payment that would be made it would be made keeping in view the ratio between them.

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