Chapter 10 Flashcards
Barter economy
A money less economy that relies on the trading/exchange of good and services.
What is the problem with the barter economy?
The 2 parties must have a “mutual coincidence of wants” exactly what each other needs.
What were the 3 types of colonial money?
Commodity, flat, and specie money.
What is commodity money?
Money that has alternative use as an economic good (gunpowder, corn, flour, etc.).
What was the main source of commodity money?
Tobacco
What is flat money?
Money by government decree; has no alternative use as a commodiy
What is an example of flat money?
Wampum (Shells) were given monetary value
Paper currency
What is specie money?
Currency in silver or gold coins.
Most desirable form of money because of its mineral content and its limited supply (increased value).
What are examples of specie money?
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
What are the 4 characteristics of money?
- Portable
- Durable
- Divisible
- Available but scarce
What are the three functions of money?
- Medium of exchange (something accepted by all parties)
- Measure of value (worth something)
- Store of value (can be saved)
What happened to money during the Rev. War?
Banks printed 250m of continental paper currency- WORTHLESS! People did not trust the government to issue anything except coins! (Articles of confederation).
When did the us gov start authorizing printing of papers again?
The Civil War
Who did the new us constitution leave the printing of money to?
The individuals state banks which issued their own currencies (had to have silver and good banking)
What were greenbacks?
Created during the Civil war (not backed up by silver/gold) cheap money! Easy to pay debts!
What is national currency.
Backed by government bonds and issued by national banks (chartered by the national banking system)
What happened during the California Gold Rush in 1848?
It created a surplus of gold. Usa goes on the gold standard. All mney is backed by/exchanged for amount of gold.
What happen to currency during the Great Depression?
The US gov began to abandon the gold standard not used after 1971.
What was created Great Depression/WWII?
The federal reserve system (FED)
What did the federal reserve system (FED) do?
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.
What is the FDIC?
The federal deposit insurance.
-customers bank account insured by the gov ($250,000).
What are today’s 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 and credit of the us government.
