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Debasement is the act of issuing more currency than is demanded by the economy. Debasement leads to a lowering of the value of money. Face value of the currency remains but its purchasing power decreases.
Debasement leads to two outcomes. Firstly inflation rises as producers demand higher prices for the same amount of goods. This can lead to economic hardship if individual income cannot keep up with the inflation. In a runaway inflation where prices rise exponentially, people cannot even afford basic necessities. One example is inflation in Weimar Germany.
Another outcome is loss of confidence to the currency. There are many outcomes in this situation. One possibility is where hoarding of other currencies or valuables such as gold and silver take place. Trade can no longer function because valuables are hoarded. The debased currency that previously served has a mode of exchange is no longer wanted. In simple cases, barter trade replaces trade using money. Black markets spring up while price controls and some form of parallel or black market pricing exist side by side.
In extreme situations, this can lead to collapse in society as the trading and distribution of goods and services become disrupted even though there is no shortage. This is because merchants cannot agree on the price of goods and no exchange takes place.
A recent example of debasement is the US Dollar. The rally in Gold and Silver prices as well as booming sales of bullion suggests that hoarding and seeking protection is happening. Confidence in the US Dollar is shaken.
What else can I help you with?
What are the effects of depreciating currency on a country?
Depreciating currency in a country will determine how strong the current economy of a country is. If the currency drops then their economy is stronger and more investements are in while if the currency exchange is high, there is depreciating economy against other countries.
What is enconmy?
Do you Mean Economy? if you do Economy is Like the Currency that a country of such has and the way they make there money.
What is a mono economy?
a mono-economy is a economy relying on one major export or natural resource to bring most of the currency into the country.
What is a money economy?
It is an economy where people use currency rather than barter to buy and sell goods.
Effects of black market currency in third world countries?
the effect of black market currency in Nigerian economy
What are the effects of depreciating currency on a country?
Depreciating currency in a country will determine how strong the current economy of a country is. If the currency drops then their economy is stronger and more investements are in while if the currency exchange is high, there is depreciating economy against other countries.
What is the economy in Sweden?
The economy in Sweden is strong, and the fastest growing in the EU, as of 2011. If you're refering to the currency, it is called 'krona' and the currency code is SEK.
What is enconmy?
Do you Mean Economy? if you do Economy is Like the Currency that a country of such has and the way they make there money.
What is the basis of currency exchange rate?
It's basically the demand for the currency, which is determined by the economy of a country.
What is the type of currency of Carthage's economy?
Trade goods.
What was the role of currency in Mesopotamia's economy?
Currency did not exist in Mesopotamia. Instead, the economy relied on a barter system where goods and services were exchanged directly without the use of money.
What was the currency in Henry viii rule?
During the reign of Henry VIII, the primary currency in England was the pound sterling, which was subdivided into shillings and pence. The pound was equivalent to 20 shillings, and each shilling was made up of 12 pence. The currency system underwent several changes during his rule, including the introduction of new coins and debasement, which affected the value of money.
What is a mono economy?
a mono-economy is a economy relying on one major export or natural resource to bring most of the currency into the country.
What is a money economy?
It is an economy where people use currency rather than barter to buy and sell goods.
How does fake currency impact the normal functioning of the economy?
its not funny
Effects of black market currency in third world countries?
the effect of black market currency in Nigerian economy
How the currency value is fixed for different countries?
This is all interrelated to the U.S. financial economy. It is now a World Economy.
