30. Assume a country using gold alone as money and having in circulation 2,000,000 coins, under a system of free coinage. What would be the effect of closing the mints and issuing 1,500,000 new coins containing nine-tenths as much gold as the coins above mentioned, assuming that the number of goods exchanged remains the same? Explain clearly. What is the total quantity of such new coins the government can issue and keep in circulation? Explain clearly.
31. A country using gold money as its sole medium of exchange, under free and gratuitous coinage, makes the following change: it imposes a seigniorage charge of ten per cent., but without giving up free coinage or reducing the amount of fine gold in the coin. To what extent and in what direction will the value of money change, if at all
(a) if the number of goods exchanged gradually increases five percent.;
(b) if the number of goods exchanged gradually increases twenty-five percent.?
Give your reasons clearly.
[CHAPTER 5]
FIDUCIARY MONEY, METAL AND PAPER
References.
*Jevons, chs. VIII, XVII, XVIII.
*Johnson, chs. XIII-XVI.
Kemmerer, E. W., Modern currency reforms. 1916.
*Phillips, chs. IV, V, XII.
United States Director of the Mint, Annual reports.
Walker, chs. VIII-XII.
White, Bk. II, chs. III-VI.
Questions.
1. When 5160 grains of standard gold (i.e., by weight nine-tenths fine, with the other tenth composed of the alloy used in gold coin of the United States) sell in New York for $201.25 has the money "saturation point" been reached or exceeded, and will bullion be taken to the mint or coin melted down or exported?