Supposing you have to make a payment of Rs. 100, you can do so in rupees-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 rupee-notes. What are these rupee notes really? They are 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 these mere pieces of paper bear the value of the number of rupees that is printed upon them? Why should a piece of paper, with "100" printed on it be worth twenty times as much as a piece of paper with "five" printed on it-and also worth a hundred times as much as a silver rupee-coin? The reason is that Government guarantees that the piece of paper is worth the amount printed on it and promised to pay that amount to anybody who wishes to exchange this paper for the rupee-coins. Also, if you think about it you can easily realize that crores and crores more of rupee-coins would have to be minted, if all paper-money were abolished.

Perhaps you may ask, "Then why not have paper money only?" Why use silver and Nickle 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 keep prices at their proper natural level. It 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 the money is so nice and useful that you cannot have too much of it. But if you think that, I am 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 rupee-coins as with paper money. But it is not likely to happen, for this reason: it is very easy to print a great deal of paper money, but not at all easy to increase 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.

If the government prints too much paper money, then prices ______ at once.

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The correct answer is Option (1) → go up