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Econ: What is Legal Tender? 0 Views


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Description:

What is Legal Tender? Legal tender is the tangible mode of payment used to legally satisfy financial obligations, such as a national currency in paper or coin. It is the form by which it would be acknowledged in declared legal value objectively anywhere in that nation.

Language:
English Language

Transcript

00:00

And finance Allah shmoop what is legal tender and no

00:07

it's not an official great of meat like this Filet

00:10

is legally tender but I still can't cut it And

00:12

it's not the name of a magazine that will get

00:14

you on an FBI watch list if you subscribe to

00:16

it either Legal tender refers to money like the dollars

00:19

and cents you have in your pocket that's legal tender

00:22

the actual bills and coins that allow you to buy

00:24

stuff Yeah that's legal Tender legal tender is a medium

00:27

of exchange that's been recognized by the government as thie

00:30

acceptable form of payment in that jurisdiction and old by

00:33

the way it's recognized by the people who accept it

00:36

as payment as well First medium of exchange While this

00:40

term refers to something that everyone accept is a form

00:42

of payment it's medium right It's shared by everybody kind

00:46

of in the middle It allows an economy to move

00:48

past the bartering stage of just trading beaver pelts for

00:52

bottles of Coke Think money of course but also think

00:55

gold or wampum or cigarettes in an old prison movie

00:58

Everyone recognizes value and so will trade goods and services

01:02

For the item It's a way to transfer in store

01:04

value so legal tender is a kind of medium of

01:07

exchange The legally accepted form of exchange right Those dollar

01:11

bills are the legally accepted form Well the government has

01:14

said In our country this will be the medium of

01:17

exchange So in the US it's dollars in the you

01:20

It's the euro In the UK it's the pound in

01:22

South Africa it's the rand and so on So you're

01:26

on a cruise ship that sinks way out in the

01:28

ocean You and some of the other vacationers wash up

01:31

on a desert island Everyone starts doing different jobs One

01:34

guy build shelters out of palm leaves and you know

01:37

some sticky stuff He scrapes off of rocks Other people

01:40

fish or catch crabs You know the crabs you could

01:44

eat You make a delicious drink out of coconut milk

01:47

honey and the fermented juice from a weird orange berry

01:50

you found growing in a cave At first people trade

01:53

things by barter This works but well only up to

01:55

a point To trade your coconut drink for food you

01:58

need to find a fisherman who wants some of what

02:01

you've got to offer If no one with fish wants

02:04

cocoa drink today Well no fish for you Well eventually

02:08

people start stringing seashells together to make special necklaces These

02:11

necklaces get traded for anything you want Now every time

02:15

you give someone your drink well you get a string

02:17

of shells You can then use the shelves to buy

02:19

fish It's no longer necessary to find someone with fish

02:23

who wants some cocoa Drink you Khun Sell the drink

02:25

to the shelter builder for a set of shells and

02:28

then use those shells to buy fish Right So what's

02:31

happened here The shells have become the medium of exchange

02:34

there The currency of the island Well after a while

02:37

you give up hope of rescue You decided to form

02:39

your own country You elect leaders Build yourself a palm

02:42

tree and rock blue Ah Parliament house First act turned

02:45

the strings of sea shells into official currency You make

02:49

them legal tender Well the island government now Khun regulate

02:53

the number of shell strings that get made the same

02:55

way The Federal Reserve in the Treasury Department print currency

02:58

and regulate the dollars that circulate through the economy You've

03:01

been selling out of coconut and you've built up quite

03:03

a pile of shells there You're getting rich Now if

03:06

you get rescued first step after a shower Of course

03:09

Check the foreign currency exchange market for the shell string

03:12

two dollar exchange rate and hope it's a good one

03:15

Yeah Don't do it right at the airport Wait till

03:17

you get into town You get a way Better deal

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