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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.
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
Full Transcript
- 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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