Chapter 10 Econ

Question 1

What is a barter economy?

Answer 1

A money-less economy that relies on the trading/ exchange of goods and services

Question 2

What is the problem with a barter economy?

Answer 2

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

Question 3

What are the three types of colonial money?

Answer 3

1. Commodity money
2. Fiat money
3. Specie money

Question 4

What is commodity money?

Answer 4

Money that has an alternative use as an economic good (gun powder, corn, flour, etc)

Question 5

What was commodity money used for? What was the main source of commodity money used for?

Answer 5

Used to settle debts and make purchases as well as consumed as goods. Tobacco was the main source of commodity money used

Question 6

What is fiat money?

Answer 6

Money used by government decree; has no alternative value or use a commodity?

Question 7

What are some examples of fiat money?

Answer 7

Wampum(shells) were given monetary value

Paper currency

Question 8

What is Specie money?

Answer 8

Money in the form of gold or silver coins

Question 9

What was the most desirbale form of money? And why?

Answer 9

Specie money. It was the most desirable because of the mineral content and limited supply (increased value)

Question 10

What was the most popular coin in the colonies? Explain it

Answer 10

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

Question 11

What are the 4 characteristics of money?

Answer 11

1. Money must be portable
2. Durable
3. Easily divided into smaller units
4. Available but scarce (limited supply)

Question 12

What are 3 functions of money?

Answer 12

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

Question 13

How much money did the revolutionary banks print?

Answer 13

250 million dollars of continental paper

Question 14

Why did currency become worthless during the revolutionary war?

Answer 14

People did not trust the government to issue anything except coins (Articles of Confederation). Because of the large amounts of money printed

Question 15

When did the US government issue paper currency again?

Answer 15

The Civil War (by privately owned banks only)

Question 16

Who was the printing of the paper currently up to?

Answer 16

Individual State banks which issued their own currencies (had to have gold/silver backing)

Question 17

What are Greenbacks?

Answer 17

Created during the Civil War (Not backed by gold/silver) cheap money! Easy to pay debts

Question 18

What is national currency?

Answer 18

Currency backed by government bonds and issued by national banks

Question 19

What are national banks?

Answer 19

Banks chartered by the National Banking System

Question 20

What happened during the California Gold Rush (1848)?

Answer 20

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

Question 21

What happened during the Great Depression WWII (1930s)?

Answer 21

US government began to abandon the gold standard.

Question 22

When did the US Officially get rid of the gold standard? And what was formed?

Answer 22

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

Question 23

What is the FDIC?

Answer 23

The Federal Deposit Insurance

Customers bank account insured by the gov. (250,000 per bank)

Question 24

What are the US dollars called?

Answer 24

“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)