Gold Standard
Definition
The gold standard was a monetary system where the value of a country's currency was directly linked to a fixed amount of gold. It meant that every unit of currency could be exchanged for a specific amount of gold.
Analogy
Imagine you have a gift card for your favorite store, and it can only be used to purchase a fixed amount of items. Similarly, under the gold standard, each unit of currency had a fixed value just like the gift card.
Related terms
Fiat Money: Fiat money is currency that has value because the government declares it as legal tender, not because it is backed by physical commodities like gold.
Inflation: Inflation is when the general level of prices for goods and services rises over time, causing purchasing power to decrease.
Depression: A depression is an extended period of economic recession characterized by high unemployment rates, reduced production, and low consumer spending.
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