Economics of Financial Markets monetary standards
- Created by: AmyTSpokes
- Created on: 16-05-15 19:34
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- Monetary Standards
- Commodity standard
- monetary unit is a physical asset in a specified quantity and quality
- circulated medium is what people actually use as money in exchanges
- most often commodity used is gold
- The Gold standard
- gold is scarce commodity with intrinsic value
- the market for gold dictates the value of money
- fixed price of gold + held exchange rate fluctuations within narrow limits
- USD only currency directly tradeable with gold
- Bimetallism
- based on value of 2 precious metals
- usually has a fixed exchange rate between them
- based on value of 2 precious metals
- Fiat Money
- circulating medium is notes and coins worth whatever the issuing agent dictates
- value of currency not dictated by a precious metal
- the value of the medium of exchange is guaranteed by only the taxation and borrowing power of the government
- coins and notes reflect a debt of the government accepted by the government
- Commodity standard
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