D.

THE MONETARY STANDARDS: Government authority as a means of measuring value formulates the monetary
standard of a country. The logic behind its formulation is to have a uniform basis to measure the value of money
as the kilo serves as a measure of weight.

DEFINITION OF MONETARY STANDARD:

1. By Juan del Castillo = monetary standard is defined as a system which is buit upon a specific standard
value.

2. By Prof. Florentino Cabalteja, Sr. =monetary standard refers to a country’s set of laws, rules,
regulations, policies and accepted practices governing the issuance, use and demonetizations of the
different kinds of money in a particular country at a given time.

3. By Gregorio Miranda = monetary standard refers to a standard that embraces an entire monetary
system of a country having for its foundation of a particular standard of value.

4. By Zacarias M. Ronquillo = monetary standard refers to the country's policies and procedures that a
country adopts to establish a sound monetary system with its monetary unit kept at specific weights and
fineness of a standard metal used as money.

KINDS OF MONETARY STANDARDS:

I. COMMODITY STANDARD = is one in which the value or buying power of the monetary unit in circulation
is equal to the value of the commodity used as money. It is one in which the value or buying ability of
the money used in circulation is kept equal to the value of a designated quantity of a commodity.

1.1 Monometallic Standard/Monometallism = this is a standard wherein the country adopting it,
uses only one (1) Kind of metal as its standard money.

1.1.a Gold Standard= it is a standard in which the monetary unit is kept at par with a fixed weight or
value of gold. This means that the monetary unit of a country using this standard is in terms of gold with
specific weight and purity.

Classification of Gold Standard:

a) Gold coin standard = this is a standard where a country adopting it, mints gold coins of the
weight and fineness defined by its law and make these coins available for general circulation as a
medium of exchange. Under this standard, all other forms of money are kept at par with the gold coins
in circulation.

b) Gold bullion standard = It is a standard where the monetary unit consists of gold bars that
contain a definite weight of gold with specific fineness. Under this standard, all other forms of money
are redeemable in gold bars.

c) Gold exchange standard = this is a standard wherein the paper money circulated is redeemable
by means of gold drafts drawn on a foreign bank situated in a country that is under the gold bullion or
gold coin standard. Under this standard, the monetary unit of the country adopting it, is defined as a
fixed quantity of gold with specific fineness held abroad or by another country under the gold standard.
And the local currency is interconvertible at a fixed ratio with foreign gold drafts, which in turn are
convertible to gold.

Types of gold exchange standard:

 Pure-gold exchange standard= this is a standard wherein the country adopting it, does not
maintain gold reserves at home for their standard money. In short, the gold reserves for their
standard money are all kept or maintained in a foreign country that is operating as gold coin
standard or gold bullion standard country. (e.g. India)
 Mixed-gold exchange standard = under this standard, thee country adopting it, maintains
partial gold reserves at home and partial gold reserves in a foreign bank operating under the
gold coin standard or gold bullion standard country.

1.1.b. Silver Standard = this is a standard in which the monetary unit is kept at par with a fixed weight
or value of silver. Under this standard, all other forms of money circulated are all redeemable in silver,
 Classification of Silver Standard:

a) Silver coin
b) Silver bullion
c) Silver exchange

1.2 Bimetallic Standard/Bimetallism = it is a monetary standard in which the monetary unit is

defined by law in terms of two (2) metals at a fixed ratio of weight and fineness and are made both legal
tender. Under this standard, there is free and unlimited coinage of both metals at a fixed ratio, called
mint or legal ratio.

Mint or legal Ratio = refers to an expression of the relative values of the metals when these are used as
medium of exchange.

Example: 371.25 = 15 or 5:1

24.75
This means that for every part or measure of gold, fifteen (15) parts of silver would equal its value

Market Ratio = it is the expression of the relative values of the two (2) metals when these are used as
commodities in the market.

The Gresham's Law = the law states that when two kinds of metals of different values are circulated
with equal legal tender power, the metal of lesser value tends to drive the other metal of greater value
out of circulati0n. The law was named after Sir Thomas Gresham, the master of England's mint in the 16
century.

1.3 Simmetallic Standard/Symmetallism = this is one wherein the monetary unit would be defined
in terms of a fixed weight of two (2) or metals held at a fixed ratio contained in the coin, to be declared
by law as legal tender.

II. NON-COMMODITY STANDARD/MANAGED MONEY STANDARD = is a monetary standard wherein the

value of the monetary unit 1s very much higher than the value of the material or commodity used as money.

1. Fiat Standard = it is defined as a monetary standard where irredeemable paper money is not defined in
terms of any commodity of value and its purchasing or buying power is not kept at par with any commodity.
Under this standard, the monetary unit of a country adopting it, is fiat money = those issued by an order of the
government.

2. Inconvertible Paper Money Standard=it is a monetary standard wherein there 1s a continued

circulation and ready acceptability or paper money that bore the promise to pay specie on demand but these
were not actually redeemed.