METHODS OF NOTE ISSUE

These, are as follows; ;
1. Fixed Fiduciary Issue:
This is widely recognised as ah important method of note issue. Under this system a limit of volume of currency has Keen fixed by'central authority. Th'is. limit is'called fiduciary limit. Any note issue in this fiduciary limit is to be &acked by Government securities. However any note issued above this limit are to bin 00% backed t?y>gok). system, remained in fprce in many countries of the world at. different .times,,.,

 the merits and demerits of the system:
Merits:
(a) Controlled Supply:
Under this system-the' supply of currency riote can be held' under control. The contft)t:can:be exercised by wayof fiduciary limit.
(b) No Danger of Over Issue:

Under this system, as notes issued above a particular limit are to be 100% backed,; so there is Hot a danger of over issue. Any note above fiduciary limit are issued only after \ keeping 100% metallic reserves

Demerits:

(a)     Inelastic:

This system was adopted by England in 1844 but it was subsequently abandoned • 1913. The major reasons were mat of inelasticity and failure to response towards.the changing economic needs. This means that if economy is rapidly developing then there win be increasing demand for the currency and credit. At this moment if required volume of gold is not available than" bank will not be .able to issue notes. This will'produce adverse effects on the economy.