Chapter 10 Econ Flashcards
(24 cards)
What is a barter economy?
A money-less economy that relies on the trading/ exchange of goods and services
What is the problem with a barter economy?
How could the milkman obtain a pair of shoes if the cobbler wanted a basket of fish?
The two parties must have a “mutual coincidence of wants exactly what each other needs
What are the three types of colonial money?
- Commodity money
- Fiat money
- Specie money
What is commodity money?
Money that has an alternative use as an economic good (gun powder, corn, flour, etc)
What was commodity money used for? What was the main source of commodity money used for?
Used to settle debts and make purchases as well as consumed as goods. Tobacco was the main source of commodity money used
What is fiat money?
Money used by government decree; has no alternative value or use a commodity?
What are some examples of fiat money?
Wampum(shells) were given monetary value
Paper currency
What is Specie money?
Money in the form of gold or silver coins
What was the most desirbale form of money? And why?
Specie money. It was the most desirable because of the mineral content and limited supply (increased value)
What was the most popular coin in the colonies? Explain it
The peso. “Pieces of eight” divided into eight sub parts called “bits”- also in German called “talers” which sounded like dollars! Later became the basic monetary value and standard currency in the USA
What are the 4 characteristics of money?
- Money must be portable
- Durable
- Easily divided into smaller units
- Available but scarce (limited supply)
What are 3 functions of money?
- Medium of exchange (something accepted all parties)
- Measure of value (worth spending)
- Store of value (can be saved)
How much money did the revolutionary banks print?
250 million dollars of continental paper
Why did currency become worthless during the revolutionary war?
People did not trust the government to issue anything except coins (Articles of Confederation). Because of the large amounts of money printed
When did the US government issue paper currency again?
The Civil War (by privately owned banks only)
Who was the printing of the paper currently up to?
Individual State banks which issued their own currencies (had to have gold/silver backing)
What are Greenbacks?
Created during the Civil War (Not backed by gold/silver) cheap money! Easy to pay debts
What is national currency?
Currency backed by government bonds and issued by national banks
What are national banks?
Banks chartered by the National Banking System
What happened during the California Gold Rush (1848)?
It created a surplus of gold/silver and USA goes on the gold standard. Currency is backed by and exchanged for a specific amount of gold
What happened during the Great Depression WWII (1930s)?
US government began to abandon the gold standard.
When did the US Officially get rid of the gold standard? And what was formed?
1971
The creation of the Federal Reserve System (FED)
Created a national- central bank (a bank that can lend to other banks in times on need “bankers bank”
Set interest rates
What is the FDIC?
The Federal Deposit Insurance
Customers bank account insured by the gov. (250,000 per bank)
What are the US dollars called?
“Fiat money”- it is regulated by the Federal Reserve (not backed by gold or silver) but is backed by the “Full Faith & Credit of the U.S. gov)
