Econ 1740 notes
Chapter 12 - Money and Banking in the Developing Economy
Bimetallic Standard - A monetary system in which a government recognizes coins composed of gold or silver as legal tender. The bimetallic standard backs a unit of currency to a fixed ratio of gold and/or silver.
Central Bank - A public institution that manages a state's currency, money supply & interest rates. Central banks also usually oversee the commercial banking system of their respective countries.
Recession - A period of slow or negative economic growth (2 consecutive quarters), usually accompanied by rising unemployment.
American Monetary Unit
The dollar or Reales (a common name for the Spanish peso) and its sub-denominations were commonly used in commercial transactions along American seaboard and the most abundant form of money and was therefore adopted as the unit of account.
The new nation needed a stable monetary unit and a banking system that was sound and could supply the needed credit
Thomas Jefferson, Alexander Hamilton (the first secretary of the treasury), & Robert Morris supported dollar as American Monetary Unit
This established the decimal system we use today with money – which is much easier than the British system, which was eventually decimalized in 1971.
Coinage Act of 1792 - Set our monetary system based upon gold & silver – “Bimetallic System” for almost 75 years
Designated both gold and silver as the monetary standard for the U.S. = Bimetallic Standard and lasted for almost 75 years Silver coins contained more metal than gold coins of the same denomination. Gold (was about 15 times as valuable as silver) would add prestige and serve in higher denominations Silver would serve for smaller denominations Problematic because the value of the 2 metals fluctuated. In 1792 = 15:1 In 1790’s = 15.5:1 In 1808 = 16:1
Thus when it was 16:1 the minted gold coin was undervalued so it was better to export gold coins and exchange them
Bimetallic Standard - A monetary system in which a government recognizes coins composed of gold or silver as legal tender. The bimetallic standard backs a unit of currency to a fixed ratio of gold and/or silver.
Central Bank - A public institution that manages a state's currency, money supply & interest rates. Central banks also usually oversee the commercial banking system of their respective countries.
Recession - A period of slow or negative economic growth (2 consecutive quarters), usually accompanied by rising unemployment.
American Monetary Unit
The dollar or Reales (a common name for the Spanish peso) and its sub-denominations were commonly used in commercial transactions along American seaboard and the most abundant form of money and was therefore adopted as the unit of account.
The new nation needed a stable monetary unit and a banking system that was sound and could supply the needed credit
Thomas Jefferson, Alexander Hamilton (the first secretary of the treasury), & Robert Morris supported dollar as American Monetary Unit
This established the decimal system we use today with money – which is much easier than the British system, which was eventually decimalized in 1971.
Coinage Act of 1792 - Set our monetary system based upon gold & silver – “Bimetallic System” for almost 75 years
Designated both gold and silver as the monetary standard for the U.S. = Bimetallic Standard and lasted for almost 75 years Silver coins contained more metal than gold coins of the same denomination. Gold (was about 15 times as valuable as silver) would add prestige and serve in higher denominations Silver would serve for smaller denominations Problematic because the value of the 2 metals fluctuated. In 1792 = 15:1 In 1790’s = 15.5:1 In 1808 = 16:1
Thus when it was 16:1 the minted gold coin was undervalued so it was better to export gold coins and exchange them