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Many which is a source of so many blessings to mankind may also bring about perils and hazards. The most important thing is to ensure efficient working of economic systems by proper regulation of money supply. Money can be disadvantageous in the following ways;
1. Money can bring about social and moral evils if not properly spent. People have sacrificed moral values at the cost of money. They have become so money minded that they engage in corruption, theft and other social evils like murder and prostitution
2. Money, if not properly regulated can bring about political instability. Wide fluctuations in prices of goods and services and business activities in general, brought about by money, may bring political instability and change of government.
3. In modern world people have thought of storing their money in monetary form. Instead of utilizing in productive practices they hoard their money. This adversely affect the income growth output and employment in an economy
4. Many is a basis of credit lends and, more and more of credit creation. When the credit creation is not equalized to increase in production it results in inflationary rise in price.
5. Easy borrowing and lending facilities made possible through money may lead certain industries to use more capital than it requires. This may cause unemployment and over production.
6. Money through its excessive use and inflationary effects creates and widens the inequality in the distribution of income and wealth. This has divided the society into two parts, the haves and the have nots. This has led to conflict among themselves in the society.
7. Monetary value does not remain constant. This characteristic brings instability in the economy. Too much of money reduces its value and causes inflation and g4eneral rise in price level. On the other hand, too little money rises its value and translate to deflationary effects
8. The use of money leads to concentration of wealth in a few hands and this leads to money power being in the little hands. This may lead to exploitation of workers and brings misery and degradation to them.
However, the defects of money do not necessarily mean that it should be eliminated. It has got more merits than demerits making it the most used medium of exchange. The merits are as follows:
• Money helps in the process of distributing of national product among different factors of production in the form of rent, wages, interests and profits
• Government receives incomes and makes payments through the medium of money
• Extensive trade both internal and international is carried out through the medium of money.
• Money helps producers to discover what their people wants and how much they want. This enables them to decide on what to produce and in what quantities.
• Consumers get their incomes inform of money and this gives them ready command over variety of goods and services.
• Money efficiently facilitates capitalism. the capital system resolves around price mechanism which operates through money because all incomes and prices are expressed in terms of money.
ELVIS123 answered the question on November 15, 2017 at 03:34
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