lectur4-page3 - gold reserves. If gold reserves decreased...

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Some folks still think that the U.S. dollar is backed by gold. It is not. What do I mean when I refer to the dollar being back by gold? Well years ago, the U.S. treasury could only print as much money as the U.S. treasury had in gold reserves. For example, if the U.S. treasury had $1 billion dollars worth of gold in reserves, then only $1 billion dollars of paper money and coinage could be printed or stamped out. The only way to increase the money supply under this system was to increase
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Unformatted text preview: gold reserves. If gold reserves decreased due to payments in gold for imported commodities then the money supply had to be decreased commodities, then the money supply had to be decreased. Up until 1935, U.S. citizens could redeem their dollars for gold at the rate of $20.67 per ounce. Gold prices were essentially fixed (held constant) by the government. From 1935 to 1968, only foreign countries could redeem dollars in their possession for U.S. gold at the rate of $35.00 per ounce. 3...
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This note was uploaded on 12/29/2011 for the course ECO 210 taught by Professor Malls during the Fall '10 term at SUNY Stony Brook.

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