Lesson 52 pg. 145 - 151 Flashcards
Define specie
specie - economist term for coined, metallic money
What did the rulers during the Roman Empire and medieval time do to the metallic coins?
Rulers deliberately debased coins by lowering their quality and value. Gold and silver were mixed with various proportions of base metals to produce coins that looks like the old gold or silver coins but which actually did not contain the same weight of precious metals.
Explain Gresham’s Law
When people cannot trust the value of a form of money, they will save for themselves forms of money that seem more stable and valuable, such as coins that are many years old, and will spend forms of money that seem less valuable. This principle is called Gresham’s Law, after Sir Thomas Gresham, adviser to Queen Elizabeth I of England. “Bad money drives out good,” Gresham said, and this principle has been observed repeatedly in modern times.
Define face value
face value - the asserted value
Define inflation
inflation - when the level of prices in the market rises because too much money is in circulation
Define deflation
deflation - if prices decrease because money seems more valuable and stable
Define legal tender
legal tender - any form of money that has been declared a valid means of payment
Describe bullion
Paper money developed gradually in western Europe, beginning in the 16th century. In the beginning, people owning quantities of gold would deposit their specie (coins) or bullion (gold, silver, or platinum, usually found in the form of bars, ingots, or plates) with goldsmiths for safekeeping.
Define fractional reserve banking
fractional reserve banking - a system which allows banks to hold less than 100 percent of deposits in reserve
Define fiat money
fiat money - legal tender that is backed by nothing but a government’s promise
