What are the Merits of Monometallism?



Monometallic standard has the following advantages :

1. Simplicity:

Since only one metal is used as a standard of value, monometallism is simple to operate and easy to understand.

2. Public Confidence:

Since the standard money is made of a precious metal (gold or silver), it inspires public confidence.

3. Promotes Foreign Trade:

Monometallism facilitates and promotes foreign trade. Gold or silver standard is easily acceptable as an international means of payment.

4. Avoids Gresham's Law:

Monometallism avoids the operation of Gresham's law. According to this law, when both good as well as bad money exist in the economy, bad money tends to drive out of circulation good money.

5. Self-Operative:

It makes the supply of money self-operative. If there is surplus money supply, the value of money will fall and the people will start converting coins into metal. This will wipe out the surplus money, thus creating a balance.