Chapter 8

Question 1

Barter Economy

Answer 1

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

Question 2

What must be the case in a barter economy?

Answer 2

Two parties must have a mutual coincidence of wants. (exactly what each other needs.)

Question 3

1st coins used

Answer 3

600 BC- Lydians

Question 4

1st paper money

Answer 4

Chinese 1000 AD

Question 5

What are the 3 types of colonial money?

Answer 5

commodity money
flat money
specie money

Question 6

Commodity money

Answer 6

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

Question 7

How was commodity money used?

Answer 7

These goods were used to settle debts and to make purchases as well as consumed goods. (tobacco was the main source of commodity money used.)

Question 8

Flat money

Answer 8

money by government decree, has no alternative value or use as a commodity

Question 9

Specie money

Answer 9

is the form of gold or silver coins

Question 10

why is specie money the most desirable form of money?

Answer 10

its mineral content and limited supply

Question 11

What are the two major coins used?

Answer 11

spanish peso

talers

Question 12

Spanish peso

Answer 12

was the most popular coin in the colonies. Pieces of eight divided into eight sub-parts called bits.

Question 13

Talers

Answer 13

german money called dollars.

Question 14

What are the 4 characteristics of money

Answer 14

1. Money must be portable
2. Money must be durable
3. Money must be easily divisible
4. Money must be available but scare (limited supply)

Question 15

What are the 3 functions of money?

Answer 15

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

Question 16

What are the 3 proper ways to get a bargain?

Answer 16

1. have in no way misrepresented the truth.
2. have not set out to harm the other party
3. have created a win win deal

Question 17

What is the first key to opening the door to huge bargains?

Answer 17

learning to negotiate everything

Question 18

what are the 7 basic rules of negotiating?

Answer 18

1. always tell the absolute truth
2. use the power of cash
   cash is emotional
   cash is visual
   cash has immediacy
3. understand and use walk away power
4. shut up
5. thats not good enough
6. good guy, bad guy
7. the if i take away technique.

Question 19

what is the second key to huge bargains

Answer 19

you must have patience (dont get married to a purchase)

Question 20

What is the third key to huge bargains?

Answer 20

you must know where to find deals

Question 21

What are some places to find good deals?

Answer 21

individuals
estate sales
public auctions
couponing
garage sales
repo lot
flea markets
refunding
foreclosures
pawn shops
online auctions
classified ads
consignment sales
conventions

Question 22

how much did revolutionary war banks print?

Answer 22

250 million dollars of continental currency

Question 23

What happened thanks to revolutionary banks printing so much money?

Answer 23

money became worthless

Question 24

When did the US government authorize the printing of paper money once more?

Answer 24

the civil war

Question 25

Who was allowed to print money during the Civil war?

Answer 25

privately owned banks

Question 26

Who did the US constitution leave printing money up to?

Answer 26

individual state banks

Question 27

what was created during the civil war?

Answer 27

greenbacks

Question 28

What did greenbacks provide?

Answer 28

cheap money and an easy way to pay debts

Question 29

national currency

Answer 29

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

Question 30

What did the California gold rush create?

Answer 30

a surplus of gold

Question 31

What happened thanks to the California gold rush?

Answer 31

The US goes on the gold standard (currency is backed by and exchanged for a specific amount of gold)

Question 32

What happened during the great depression?

Answer 32

Us government began to abandon the gold standard- not used after 1971

Question 33

Creation of the Federal Reserve System

Answer 33

- Created a national central bank (a bank that can lend to other banks in times of need “bankers bank”) - interest rates

Question 34

what are todays us dollars called?

Answer 34

flat money

Question 35

flat money

Answer 35

regulated by the federal reserve (not backed by gold or silver) but is backed by the full faith and credit of the United States Government

Question 36

floating exchange rate

Answer 36

a regime where the currency price of a nation is set by the foreign exchange market (FOREX) based on supply and demand relative to other currencies.

Question 37

how much of the world uses a floating exchange rate?

Answer 37

65%

Question 38

fixed exchange rate

Answer 38

the government entirely or predominantly determines the rate.