Chapter 10

Question 1

Barter economy

Answer 1

A money less economy that relies on the trading/exchange of good and services.

Question 2

What is the problem with the barter economy?

Answer 2

The 2 parties must have a “mutual coincidence of wants” exactly what each other needs.

Question 3

What were the 3 types of colonial money?

Answer 3

Commodity, flat, and specie money.

Question 4

What is commodity money?

Answer 4

Money that has alternative use as an economic good (gunpowder, corn, flour, etc.).

Question 5

What was the main source of commodity money?

Answer 5

Tobacco

Question 6

What is flat money?

Answer 6

Money by government decree; has no alternative use as a commodiy

Question 7

What is an example of flat money?

Answer 7

Wampum (Shells) were given monetary value

Paper currency

Question 8

What is specie money?

Answer 8

Currency in silver or gold coins.

Most desirable form of money because of its mineral content and its limited supply (increased value).

Question 9

What are examples of specie money?

Answer 9

Spanish peso was the most popular in the colonies. “Pieces of eight” divided into eight subjects called bits- also in German called “talers” (dollars) which became the basic monetary unit or standard unit of currency in the usa

Question 10

What are the 4 characteristics of money?

Answer 10

1. Portable
2. Durable
3. Divisible
4. Available but scarce

Question 11

What are the three functions of money?

Answer 11

1. Medium of exchange (something accepted by all parties)
2. Measure of value (worth something)
3. Store of value (can be saved)

Question 12

What happened to money during the Rev. War?

Answer 12

Banks printed 250m of continental paper currency- WORTHLESS! People did not trust the government to issue anything except coins! (Articles of confederation).

Question 13

When did the us gov start authorizing printing of papers again?

Answer 13

The Civil War

Question 14

Who did the new us constitution leave the printing of money to?

Answer 14

The individuals state banks which issued their own currencies (had to have silver and good banking)

Question 15

What were greenbacks?

Answer 15

Created during the Civil war (not backed up by silver/gold) cheap money! Easy to pay debts!

Question 16

What is national currency.

Answer 16

Backed by government bonds and issued by national banks (chartered by the national banking system)

Question 17

What happened during the California Gold Rush in 1848?

Answer 17

It created a surplus of gold. Usa goes on the gold standard. All mney is backed by/exchanged for amount of gold.

Question 18

What happen to currency during the Great Depression?

Answer 18

The US gov began to abandon the gold standard not used after 1971.

Question 19

What was created Great Depression/WWII?

Answer 19

The federal reserve system (FED)

Question 20

What did the federal reserve system (FED) do?

Answer 20

Created a national central bank ( a bank that can lend to other banks in times of need “bankers bank” that also sets the interest rates.

Question 21

What is the FDIC?

Answer 21

The federal deposit insurance.

-customers bank account insured by the gov ($250,000).

Question 22

What are today’s us dollars called ?

Answer 22

Fiat money- it is regulated by the federal reserve (not backed by gold or silver) but is backed by the full faith and credit of the us government.