Gold receipts and loans from the goldsmiths.

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 35, Problem 1DQ

To determine

Gold receipts and loans from the goldsmiths.

Expert Solution & Answer

Explanation of Solution

During the ancient times traders started to use gold for transactions. But in certain circumstances, it was realized that it was unsafe and inconvenient to carry gold for weighing and to scrutinize its purity for each transactions. So, during the sixteenth century, the goldsmiths came into the picture and people started to deposit their gold at the goldsmiths. These goldsmiths will store their gold in the vaults for a particular fee. Once they receive the gold, the goldsmith will issue a receipt to the respective person for depositing the gold. These receipts went on to become the first type of paper money, as people very soon started to pay for commodities using these receipts from the goldsmith. Merchants willingly accepted these receipts, as they knew that they can exchange these receipts for gold or reuse them to buy commodities and services.

The main problem with these receipts were that in case the goldsmith gave more receipts than the value of gold that he had, will make them vulnerable “runs” or “panics”. For example, consider that the goldsmith gave away receipts equaling twice the value of gold he has in his reserves, and if all the people having these receipts come to him asking for gold for their receipts; then it will be impossible for him to meet the demand.

Economics Concept Introduction

Concept introduction:

Receipt: It is a written acknowledgment that something of value has been transferred from one party to another.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

1. Imagine a society that produces military goods and consumer goods, which we'll call "guns" and "butter." a. Draw a production possibilities frontier for guns and butter. Using the concept of opportunity cost, explain why it most likely has a bowed-out shape. b. Show a point that is impossible for the economy to achieve. Show a point that is feasible but inefficient. c. Imagine that the society has two political parties, called the Hawks (who want a strong military) and the Doves (who want a smaller military). Show a point on your production possibilities frontier that the Hawks might choose and a point the Doves might choose. d. Imagine that an aggressive neighboring country reduces the size of its military. As a result, both the Hawks and the Doves reduce their desired production of guns by the same amount. Which party would get the bigger "peace dividend," measured by the increase in butter production? Explain.

A health study tracked a group of persons for five years. At the beginning of the study, 20%were classified as heavy smokers, 30% as light smokers, and 50% as nonsmokers. Resultsof the study showed that light smokers were twice as likely as nonsmokers to die duringthe five-year study, but only half as likely as heavy smokers.A randomly selected participant from the study died during the five-year period. Calculatethe probability that the participant was a heavy smoker

Consider two assets with the following returns: State Prob. of state R₁ R2 1 23 13 25% 5% 2 -10% 1% Compute the optimal portfolio for an investor having a Bernoulli utility of net returns u(r) = 2√√r+ 10. Compute the certainty equivalent of the optimal portfolio. Do the results change if short-selling is not allowed? If so, how?

Answer 2

Question

Chapter 35, Problem 1DQ

To determine

Gold receipts and loans from the goldsmiths.

Expert Solution & Answer

Explanation of Solution

During the ancient times traders started to use gold for transactions. But in certain circumstances, it was realized that it was unsafe and inconvenient to carry gold for weighing and to scrutinize its purity for each transactions. So, during the sixteenth century, the goldsmiths came into the picture and people started to deposit their gold at the goldsmiths. These goldsmiths will store their gold in the vaults for a particular fee. Once they receive the gold, the goldsmith will issue a receipt to the respective person for depositing the gold. These receipts went on to become the first type of paper money, as people very soon started to pay for commodities using these receipts from the goldsmith. Merchants willingly accepted these receipts, as they knew that they can exchange these receipts for gold or reuse them to buy commodities and services.

The main problem with these receipts were that in case the goldsmith gave more receipts than the value of gold that he had, will make them vulnerable “runs” or “panics”. For example, consider that the goldsmith gave away receipts equaling twice the value of gold he has in his reserves, and if all the people having these receipts come to him asking for gold for their receipts; then it will be impossible for him to meet the demand.

Economics Concept Introduction

Concept introduction:

Receipt: It is a written acknowledgment that something of value has been transferred from one party to another.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 35, Problem 1DQ

To determine

Gold receipts and loans from the goldsmiths.

Expert Solution & Answer

Explanation of Solution

During the ancient times traders started to use gold for transactions. But in certain circumstances, it was realized that it was unsafe and inconvenient to carry gold for weighing and to scrutinize its purity for each transactions. So, during the sixteenth century, the goldsmiths came into the picture and people started to deposit their gold at the goldsmiths. These goldsmiths will store their gold in the vaults for a particular fee. Once they receive the gold, the goldsmith will issue a receipt to the respective person for depositing the gold. These receipts went on to become the first type of paper money, as people very soon started to pay for commodities using these receipts from the goldsmith. Merchants willingly accepted these receipts, as they knew that they can exchange these receipts for gold or reuse them to buy commodities and services.

The main problem with these receipts were that in case the goldsmith gave more receipts than the value of gold that he had, will make them vulnerable “runs” or “panics”. For example, consider that the goldsmith gave away receipts equaling twice the value of gold he has in his reserves, and if all the people having these receipts come to him asking for gold for their receipts; then it will be impossible for him to meet the demand.

Economics Concept Introduction

Concept introduction:

Receipt: It is a written acknowledgment that something of value has been transferred from one party to another.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 35, Problem 1DQ

To determine

Gold receipts and loans from the goldsmiths.

Expert Solution & Answer

Explanation of Solution

During the ancient times traders started to use gold for transactions. But in certain circumstances, it was realized that it was unsafe and inconvenient to carry gold for weighing and to scrutinize its purity for each transactions. So, during the sixteenth century, the goldsmiths came into the picture and people started to deposit their gold at the goldsmiths. These goldsmiths will store their gold in the vaults for a particular fee. Once they receive the gold, the goldsmith will issue a receipt to the respective person for depositing the gold. These receipts went on to become the first type of paper money, as people very soon started to pay for commodities using these receipts from the goldsmith. Merchants willingly accepted these receipts, as they knew that they can exchange these receipts for gold or reuse them to buy commodities and services.

The main problem with these receipts were that in case the goldsmith gave more receipts than the value of gold that he had, will make them vulnerable “runs” or “panics”. For example, consider that the goldsmith gave away receipts equaling twice the value of gold he has in his reserves, and if all the people having these receipts come to him asking for gold for their receipts; then it will be impossible for him to meet the demand.

Economics Concept Introduction

Concept introduction:

Receipt: It is a written acknowledgment that something of value has been transferred from one party to another.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 35, Problem 1DQ

To determine

Gold receipts and loans from the goldsmiths.

Expert Solution & Answer

Explanation of Solution

During the ancient times traders started to use gold for transactions. But in certain circumstances, it was realized that it was unsafe and inconvenient to carry gold for weighing and to scrutinize its purity for each transactions. So, during the sixteenth century, the goldsmiths came into the picture and people started to deposit their gold at the goldsmiths. These goldsmiths will store their gold in the vaults for a particular fee. Once they receive the gold, the goldsmith will issue a receipt to the respective person for depositing the gold. These receipts went on to become the first type of paper money, as people very soon started to pay for commodities using these receipts from the goldsmith. Merchants willingly accepted these receipts, as they knew that they can exchange these receipts for gold or reuse them to buy commodities and services.

The main problem with these receipts were that in case the goldsmith gave more receipts than the value of gold that he had, will make them vulnerable “runs” or “panics”. For example, consider that the goldsmith gave away receipts equaling twice the value of gold he has in his reserves, and if all the people having these receipts come to him asking for gold for their receipts; then it will be impossible for him to meet the demand.

Economics Concept Introduction

Concept introduction:

Receipt: It is a written acknowledgment that something of value has been transferred from one party to another.

Answer 6

Chapter 35, Problem 1DQ

To determine

Gold receipts and loans from the goldsmiths.

Expert Solution & Answer

Explanation of Solution

During the ancient times traders started to use gold for transactions. But in certain circumstances, it was realized that it was unsafe and inconvenient to carry gold for weighing and to scrutinize its purity for each transactions. So, during the sixteenth century, the goldsmiths came into the picture and people started to deposit their gold at the goldsmiths. These goldsmiths will store their gold in the vaults for a particular fee. Once they receive the gold, the goldsmith will issue a receipt to the respective person for depositing the gold. These receipts went on to become the first type of paper money, as people very soon started to pay for commodities using these receipts from the goldsmith. Merchants willingly accepted these receipts, as they knew that they can exchange these receipts for gold or reuse them to buy commodities and services.

The main problem with these receipts were that in case the goldsmith gave more receipts than the value of gold that he had, will make them vulnerable “runs” or “panics”. For example, consider that the goldsmith gave away receipts equaling twice the value of gold he has in his reserves, and if all the people having these receipts come to him asking for gold for their receipts; then it will be impossible for him to meet the demand.

Economics Concept Introduction

Concept introduction:

Receipt: It is a written acknowledgment that something of value has been transferred from one party to another.

Answer 7

Chapter 35, Problem 1DQ

To determine

Gold receipts and loans from the goldsmiths.

Answer 8

Expert Solution & Answer

Explanation of Solution

During the ancient times traders started to use gold for transactions. But in certain circumstances, it was realized that it was unsafe and inconvenient to carry gold for weighing and to scrutinize its purity for each transactions. So, during the sixteenth century, the goldsmiths came into the picture and people started to deposit their gold at the goldsmiths. These goldsmiths will store their gold in the vaults for a particular fee. Once they receive the gold, the goldsmith will issue a receipt to the respective person for depositing the gold. These receipts went on to become the first type of paper money, as people very soon started to pay for commodities using these receipts from the goldsmith. Merchants willingly accepted these receipts, as they knew that they can exchange these receipts for gold or reuse them to buy commodities and services.

The main problem with these receipts were that in case the goldsmith gave more receipts than the value of gold that he had, will make them vulnerable “runs” or “panics”. For example, consider that the goldsmith gave away receipts equaling twice the value of gold he has in his reserves, and if all the people having these receipts come to him asking for gold for their receipts; then it will be impossible for him to meet the demand.