Chapter 8 Flashcards
Barter Economy
a money-less economy that relies on the trading/exchange of goods and services.
What must be the case in a barter economy?
Two parties must have a mutual coincidence of wants. (exactly what each other needs.)
1st coins used
600 BC- Lydians
1st paper money
Chinese 1000 AD
What are the 3 types of colonial money?
commodity money
flat money
specie money
Commodity money
money that has an alternative use as an economic good. (gunpowder, corn, flour)
How was commodity money used?
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.)
Flat money
money by government decree, has no alternative value or use as a commodity
Specie money
is the form of gold or silver coins
why is specie money the most desirable form of money?
its mineral content and limited supply
What are the two major coins used?
spanish peso
talers
Spanish peso
was the most popular coin in the colonies. Pieces of eight divided into eight sub-parts called bits.
Talers
german money called dollars.
What are the 4 characteristics of money
- Money must be portable
- Money must be durable
- Money must be easily divisible
- Money must be available but scare (limited supply)
What are the 3 functions of money?
- Medium of exchange (something accepted by all parties)
- Measure of value (worth something)
- Store of value (can be saved)
What are the 3 proper ways to get a bargain?
- have in no way misrepresented the truth.
- have not set out to harm the other party
- have created a win win deal
What is the first key to opening the door to huge bargains?
learning to negotiate everything
what are the 7 basic rules of negotiating?
- always tell the absolute truth
- use the power of cash
cash is emotional
cash is visual
cash has immediacy - understand and use walk away power
- shut up
- thats not good enough
- good guy, bad guy
- the if i take away technique.
what is the second key to huge bargains
you must have patience (dont get married to a purchase)
What is the third key to huge bargains?
you must know where to find deals
What are some places to find good deals?
individuals estate sales public auctions couponing garage sales repo lot flea markets refunding foreclosures pawn shops online auctions classified ads consignment sales conventions
how much did revolutionary war banks print?
250 million dollars of continental currency
What happened thanks to revolutionary banks printing so much money?
money became worthless
When did the US government authorize the printing of paper money once more?
the civil war
Who was allowed to print money during the Civil war?
privately owned banks
Who did the US constitution leave printing money up to?
individual state banks
what was created during the civil war?
greenbacks
What did greenbacks provide?
cheap money and an easy way to pay debts
national currency
currency backed by government bonds and issued by national banks (banks chartered by the national banking system)
What did the California gold rush create?
a surplus of gold
What happened thanks to the California gold rush?
The US goes on the gold standard (currency is backed by and exchanged for a specific amount of gold)
What happened during the great depression?
Us government began to abandon the gold standard- not used after 1971
Creation of the Federal Reserve System
- Created a national central bank (a bank that can lend to other banks in times of need “bankers bank”)
- interest rates
what are todays us dollars called?
flat money
flat money
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
floating exchange rate
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.
how much of the world uses a floating exchange rate?
65%
fixed exchange rate
the government entirely or predominantly determines the rate.
