Economics: Chapter 14 - Sec 2

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selling bonds did not raise enough money for the civil war, it didn't require gold or silver to back it up

Greenbacks - Why did Congress finally decide to print paper currency? What was the problem?

the New Constitution allowed private banks to issue paper currency

Growth of State Banking - Why did banking become popular after the Revolution?

reserve requirement which is the percentage of every deposit that must be set aside as legal reserves (10%)

How is the size of bank reserves determined?

the printed 250 million but it was abandoned (continental currency)

Privately Issued Bank Notes - What led Americans' distrust of paper currency during the Revolutionary War?

each bank issued its own currency in different sizes, banks were tempted to issue too many notes, counterfeiting

Problems with Currency - What problems arose from having different sources of currency?

overexpansion of banking, none had deposit insurance for customers which caused a bank run

What factors contributed to the bank failures at the start of the Great Depression?

Federal Deposit Insurance Corporation initially insured customers deposits to a maximum of 2,500 in the event of a bank failure

What is the FDIC?

National Banking System (NBS) - charted by national government

What was established by the National Currency Act of 1863

privately owned banks

Who owns the Federal Reserve System?

gold certificates

paper currency backed by gold placed on deposit with the Treasury

silver certificates

paper currency backed by silver dollars and bullion placed on reserve with the Treasury


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