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GROSS DOMESTIC PRODUCT, INS AND OUTS: Gross domestic product is the total market value of all goods and services produced within the political boundaries of an economy during a given period of time, usually one year. Obtaining this value is not a simple task. It requires combining a lot of information from a number of different sources. For the U.S. economy, this includes trillions of dollars worth of production, hundreds of million of consumers, hundreds of thousands of businesses, and a bunch of market transactions each year.

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Lesson 19: Money Creation | Unit 2: Fred Returns Page: 6 of 23

Topic: Currency <=PAGE BACK | PAGE NEXT=>

Our honest and trustworthy Fred discovers paper currency.

Fred's system:

  • Fred tracks gold deposits and withdrawals by issuing receipts for each deposit.
  • Fred returns the gold in exchange for a receipt.Three features:
  • First: The knight need not, and probably does not, withdraw the same gold deposited.
  • Second: Fred need not personally know each knight requesting services.
  • Third: Gold receipts are as good as gold, because people know the receipts can be redeemed for gold.Therefore:
  • Gold receipts become money for the local economy.
  • Fred has discovered paper currency, fiat money, and what is comparable to the checkable deposit function of modern banks.

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VOLUNTARY EXCHANGE

The process of willingly trading one valuable commodity (good, service, or resource) for another. The key term is "willingly," which distinguishes voluntary exchanges from involuntary exchanges, such as those created by government taxes. Voluntary exchanges are the foundation of market transactions.

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BLACK DISMALAPOD
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Today, you are likely to spend a great deal of time at a garage sale seeking to buy either a coffee cup commemorating the 2000 Olympics or a birthday gift for your grandmother. Be on the lookout for bottles of barbeque sauce that act TOO innocent.
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More money is spent on gardening than on any other hobby.
"Now is the only time there is. Make your now wow, your minutes miracles, and your days pay. Your life will have been magnificently lived and invested, and when you die you will have made a difference."

-- Mark Victor Hansen

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