What are the Demerits of Monometallism?


The following are the demerits of monometallism :

1. Costly Standard:

It is a costly standard and all countries, particularly the poor countries, cannot afford to adopt it.


2. Lacks Elasticity:

Monometallism lacks elasticity. Money supply depends upon the metallic reserves. Thus, money supply cannot be changed in accordance with the requirements of the economy.

3. Retards Economic Growth:

Economic growth requires expansion of money supply to meet the increasing needs of the economy. But, under monometallism, scarcity of metal may create scarcity of money supply which, in turn, may hinder economic growth.


4. Lacks Price Stability:

Since the price of the metal cannot remain perfectly stable, the value of money (on the internal price level) under monometalism lacks stability.


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