Hard Currency Case Study
AP US History Hard Currency: Sound Money or a Cross of Gold?
1) Since the amounts are fixed, deflation will cause the amount to be lower each month for him. If the rates were not fixed, he’d be angry but having fixed rates keeps his cost low and the lender loses out.
2) Even though farmers can buy goods cheaper, they have to sell theirs cheaper. Also the money it takes to ship will still be present. Buyers are needed as well and they don’t want to pay much if they don’t have much money either. If prices fall, they may have spent more on buying goods and now can’t sell their goods for a profit.
3) For a lender who receives payments, deflation can be good. If they lend someone $100 in gold, and now price drops, the borrower has to pay back
1) Since the amounts are fixed, deflation will cause the amount to be lower each month for him. If the rates were not fixed, he’d be angry but having fixed rates keeps his cost low and the lender loses out.
2) Even though farmers can buy goods cheaper, they have to sell theirs cheaper. Also the money it takes to ship will still be present. Buyers are needed as well and they don’t want to pay much if they don’t have much money either. If prices fall, they may have spent more on buying goods and now can’t sell their goods for a profit.
3) For a lender who receives payments, deflation can be good. If they lend someone $100 in gold, and now price drops, the borrower has to pay back