Question

1. what do you think would happen to retail prices if the United States withdrew the penny from circulation? why?
2. some observers suggest eliminating the nickel as well, since each one cost more than 9 cent to make and distribute. do you agree, why? and or why not? what would be the effect of such a decision on prices?

Answer 1

The reasons that we still need penny are:

--If we eliminate the penny then everything will have to be rounded to the nickel. Consequently the merchants may probably round everything up in their favor, as a result cost will increase for everything we buy.

--Consumers using credit wouldn’t be affected by this, however the poor will be affected the most, because they are most likely to make more smaller frequent purchases, therefore suffering the rounding up will be more often.

--Charities rely on pennies. There is several numbers of small charities that depend on penny drives to bring in donations. If pennies drop out of circulation, the nickel will become the lowest-value coin cluttering up people’s pockets. People don't think much of pouring out their old penny jars to support these drives; however they won't part with nickels so easily.

--Penny is the only coin bearing the image of Abraham Lincoln, probably our country’s most revered president. The elimination of the penny would be disrespectful to his memory.

--Nickels cost even more to make. The elimination of the penny will require more nickels in circulation.