Read the following passage and answer the question below:
Suppose you have to make a payment $50, you can do so in coins, but it would be cumbersome to pay in nickel or copper coins, because they are heavy to carry and also because it takes much time to count them. The Government, therefore, permits you to make the payment in notes. What are those notes really? They are a kind of money, right enough, although they are made of paper instead of metal. You can use them in just the same way that you use ordinary money. The reason why they are made of paper and used is that they save the trouble of carrying metal coins about of course, paper is lighter than metal and they also save using silver and other metals when they are scarce. What makes this mere piece of paper bear the value of the number of coins that is printed upon them? Why should a piece of paper, with "50" printed on it be worth ten times as much as piece of paper with "five" print on it - and also worth a fifty times as much as a coin? The reason is that Government guarantees that the piece of paper is worth the amount printed on it and promises to pay that amount to anybody who wishes to exchange this paper for the coins. Also, if you think about it you can easily realize that cores and cores more of coins would have to be minted, if all paper money abolished.
Perhaps you may ask, "Then why not have paper money only? Why use silver and nickel and copper at all? The answer is - because money must as we have already said, be something so useful that everyone wants. Also because the metals are the best form of money, and thirdly because it would be impossible to print just the right amount of paper money that would keeps prices at their proper natural level. If any Government prints too much paper money, then prices go up at once. The supply of money is increased and therefore its value in food, clothes, books, houses, land, tools and everything else) goes down. You may think at first that it is queer to talk of having too much paper money and that money is so nice and useful that you cannot have too much of it. But if you think that, one is afraid you are forgetting that money is only useful for what it will buy, so it is no good at all having more money if there are no more things to buy with it. The more money there is, the higher will be the prices of everything. The same thing happens with coins as with paper money. But it is not likely to happen, for this reason: It is very easy to prints a great deal of paper money, but not at all easy to increase the amount of coins. Silver has to be dug out of mines, and very difficult to get; so the amount there is if it keeps very steady and changes very little In fact that is one of the chief reasons why it was chosen to make coins of.
