Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 25, Problem 1.5P
To determine
Whether the locally issued dollar qualify as money or not.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
As early as the year 1000 CE, nigeria used silver and other metal coins as currency. This is an example of bartercommodity/ moneyrepresentative (commodity-backed)/ moneyfiat money. In 1695, a private bank was granted the right to issue notes that were convertible to silver. This is an example of bartercommodity/ moneyrepresentative (commodity-backed)/ moneyfiat money.
After the collapse of this system, a few new systems were implemented, most of which also adopted the silver standard. In 1873, the nigerian currency was introduced, and it was directly convertible to gold. This is an example of bartercommodity/ moneyrepresentative (commodity-backed)/ moneyfiat money.
. For the next 100 years, the nigerian currency fell off and on the gold standard until it finally abandoned the gold standard for good in 1971. The nigerian currencyremained pegged to various other currencies until 1992, when it was allowed to float. Today, the nigerian currency follows the price of oil pretty…
International Gold Standard (19th century): If different countries fix the price of their currencies
e in terms of gold this immediately implies that e are fixed. If the Central Bank of two countries
stand ready to buy and sell gold at a fixed price in terms of their respective domestic currencies,
then there is only one value of e that eliminates the possibility of arbitrage.
Suppose that S100 buys 1 ounce of gold and 100 pounds buys lounce of gold. Under fixed
exchange rates, this implies that IS buys Ipound. Explains what would happen (arbitrageurs' action
and result) if instead e-1S buys 2 pounds
Initially, the Republic of Gorgonzola has no commercial banking system. To make trading easier and eliminate the need for barter, the government directs the central bank of Gorgonzola to put into circulation 4,000,000 identical paper notes, called guilders. The central bank prints the guilders and distributes them to the people. At this point the Gorgonzolan money supply is 4,000,000 million guilders.In order to keep the money safe, some Gorgonzolan entrepreneurs set up a system of commercial banks. When people need to make a payment, they can either withdraw their guilders or write a check on their account. Checks give the banks permission to transfer guilders from the account of the person paying by check to the account of the person to whom the check is made out. With a system of payments based on checks, the paper guilders need never leave the banking system, although they flow from one bank to another as a depositor of one bank makes a payment to a depositor in another bank.…
Chapter 25 Solutions
Principles of Economics (12th Edition)
Knowledge Booster
Similar questions
- State three ways in which a government can influence the value of its currency. For each, state whether the activity affects the supply-side or demand-side of the market, and name a disadvantage of the strategy.arrow_forwardA barter economy is an economy where goods and services are exchanged for money. money is exchanged for goods and services. goods and services are exchanged for other goods and services. goods and services are exchanged for liabilities.arrow_forwardIn a less-developed economy, cattle is widely accepted as payment for goods and services. Nearly all goods and services are priced in terms of cattle; however, cows vary in quality, become less valuable with age, and are difficult to move over long distances. Which of the following functions of money do cattle provide? Select the two correct answers. portability uniformity medium of exchange unit of account store of valuearrow_forward
- To ensure that paper money will be accepted, the U.S. government implicitly promises the public that Group of answer choices it will not change currency denominations so that the paper currencies U.S. citizens have will continue to be used for exchanges. the U.S. monetary system will always be backed by a precious metal. it will not print money so fast that it loses its value. it will not change the rate at which the dollar is exchanged for other currencies.arrow_forwardMoney serves three functions in the economy: medium of exchange, unit of account, and store of value. Which of the following statements describes how inflation affects the ability of money to serve as a unit of account? Check all that apply. Inflation erodes money's purchasing power. In some countries with hyperinflation, prices are posted in terms of U.S. dollars rather than the local currency, even though the local currency is still used to purchase the good. Inflation causes menu costs.arrow_forwardA decrease in the demand for bitcoin has the immediate effect of and the subsequent effect of increasing; increasing the marginal cost of producing bitcoin increasing: increasing the supply of bitcoin decreasing; decreasing the marginal cost of producing bitcoin decreasing; decreasing the supply of bitcoin the purchasing power of bitcoinarrow_forward
- Money is commonly defined as A generally accepted medium of exchange. A U.S. dollar. Paper currency and coinage. Precious metals.arrow_forwardWhich of the following is an example of fiat money? Group of answer choices A U.S. one-hundred dollar bill Cigarettes A government bond An ounce of goldarrow_forwardIf ours were a barter economy, how would you pay your tuition bill? What if your college did not want the goods or services you offered in payment?arrow_forward
- Indicate whether each item in the following table is scarce, portable, divisible, or uniform. (Check all that apply.) A Federal Reserve note A Visa credit card Scarce 四 Portable Divisible Uniformarrow_forwardDistinguish between commodity money and fiat moneyarrow_forwardCongress established the Federal Reserve System in 1914. Up to this point, the United States did not have a national currency; Federal Reserve notes are still the paper currency in circulation today. Earlier attempts at establishing a central bank were opposed on the grounds that a central bank would give the federal government monopoly over money. This was a reflection of the historic debate between maintaining states’ rights versus establishing a strong centralized authority in the United States. That is, the creation of the Fed and a national currency would mean that states would no longer have the authority to control the money supply on a regional level. Discuss the debate between states’ rights versus centralized authority in the context of the Economic and Monetary Union and the European Central Bank.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Economics Today and Tomorrow, Student EditionEconomicsISBN:9780078747663Author:McGraw-HillPublisher:Glencoe/McGraw-Hill School Pub Co
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Economics Today and Tomorrow, Student Edition
Economics
ISBN:9780078747663
Author:McGraw-Hill
Publisher:Glencoe/McGraw-Hill School Pub Co
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning