Economics PART 2 Flashcards
Part 1: Money
How many different types of money are there?
2!
What is the first type of money?
Commodity
What is commodity money??
Objects that are useful one its own
What are 2 examples of commodity money??
1- Gold, gold can be made into useful or beautiful objects.
2- markers during a classroom shortage.
What is one more example of commodity money that can do a few things?
A cow, the cow can give milk, be used for food, or leather..
What is the second type of money??
Fiat $.
What is fiat money?
Fiat money is money that has no money on its own ; no value
If fiat money has no money, why is it accepted?
it’s accepted because the government issues it or people are willing to accept it
what are examples of fiat money?
Monopoly money,bit coins, paper bills, checks,
What are the qualities of effective money?
- it is portable
- stable in value (meaning its the worth the same, and wont quickly change)
- it is a uniform meaning sizes of cash stay the same
- can be used anywhere
- divisible (can be broken into smaller amounts)
- scarce (rare and valuable- ex:gold
What is valuable and what is an example?
Valuable: worth a lot of money, rare
Ex: gold
What does it mean to divide effective money?
It is like when you go to0 the bank and turn a 50 dollar bill too 10s.
Part 2: History of Money
What is bartering?
Trading WITHOUT money.
Ex: trading a cow, for a cow
Why is livestock traded?
It is traded because they provided food, transportation, and clothing materials.
True or false: metal coins have value today..
They are collectors items and are worth money if you sell them but no they did have value, because they were the currency from 2500 BCE-
How did they identify if metal coins were real and not faux?
Real metal coins had images of Gods stamped on them, metal coins without those were faux!
What was a good thing about paper currency, and when was it created?
A good thing about paper currency, which was used in 618 BCE was that it was lightweight and easy to carry!
The gold standard had to be _____ __ ___ ___ ____ ________?….
Backed by a scarce and valuable thing to make it have value
true or false: Having three types of metal to back up makes it more stable
False!
You can have one to make it make stable.
What was adopted with the rule: having one type of metal to back up makes it more stable?
Gold was adopted
What where the different times gold was adopted?
By the U.S in 1900
- by Great Britain in 1819
What did the good standard act almost lead too?
Money that was almost scarce.
Could you exchange gold for fiat currency?
No, that was decided by President Nixon in 1971. No because gold was valuable
When was fiat currency taken off the u.s currency ?
In 1978
Part 3
What is a nickname for the federal reserve?
The fed.
What does the federal reserve regulate?
It regulates banks and helps control the supply of $ in the U.S.
How many regional banks hold in from commercial banks?
There are 12.
The chairman is appointed by who?
The current president for example, ours is Donald Trump. Our chairman is Jerome Powell. So Jerome was set by trump.
How long is the term for the chairman?
It is 4 years.
What is inflatation:
It is when food prices for any goods/service increase over time because the money is needed to buy them
What are the 3 theories to explain inflation?
- If the amount of money grows faster than the amount of goods/services = scarcity /inflatation
- If the demand for goods is higher than the amount of goods
- So finally,
If it costs business’ more money to procure goods/services.
What is a way inflatation can be good?
- it is slow and gradual
What is another way inflatation CAN BE good?
It can help with employment levels, the Fed found 25% income inflatation over time helps it. That is a very good thing.
True or false:
Inflatation can be bad
True it can be bad and good.
True or false:
Inflatation can cause prices to increase faster than wages do.
True!,
What are two bad things about inflation?
- It can cause PANIC.
It causes panic because of the price increases - It is difficult for some to buy goods/services also because of the prices raising.
Inflatation can also reduce ______.
Inflatation can also reduce spending.
What is deflation?
It is the opposite of inflation. It is a decrease of prices, while inflatation is an increase.
When does deflation happen?
It happens when unemployment is high so they would need to lower prices to help the unemployed. It is all a cycle.
