Final answer:
The debasement of gold and silver coins historically resulted in an increase in the supply of money, leading to inflation rather than deflation, and was a strategy used to counteract the harmful effects of deflation for debtors.
Step-by-step explanation:
Historically, when gold and silver coins were used as money, their debasement by governments often led to an increase in the supply of money. Debasing currency meant that metallic coins were mixed with lesser metals, reducing their precious metal content. As a result, more coins could be minted from the same amount of gold or silver, thus increasing the money supply. This often led to inflation, as the value of each individual coin was diminished, though it temporarily increased the number of coins in circulation.
Debasement did not lead to deflation, which is the decrease in the price levels of goods and services and often results from a reduction in the supply of money. In fact, debasement of the currency was a way to combat the effects of deflation, particularly for those who owed money, such as farmers as mentioned earlier. It did not increase the amount of gold bullion nor necessarily increase the desire to hold coins as a store of wealth because the real value of the money was reduced. Lastly, debasement did not lead to a decrease in the money supply but rather the opposite.