Gold Standard
Definition
The gold standard refers to a monetary system where a country's currency is directly linked to and can be exchanged for a fixed amount of gold. It means that the value of money is determined by its gold equivalent.
Analogy
Imagine you have a gift card that can only be used to buy specific items at a store, and those items are priced based on their weight in gold. That's similar to how the gold standard works – the value of money depends on its weight in gold.
Related terms
Inflation: Inflation refers to the general increase in prices over time, causing the purchasing power of money to decrease.
Exchange Rate: Exchange rate is the value of one country's currency compared to another country's currency.
Depression: Depression, also known as an economic recession or downturn, is a severe and prolonged decline in economic activity characterized by high unemployment rates and low production levels.
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