Hutch's economy Test. Paper as Money 101. Students are asked to bring their own demonstration materials and elaborate on their answers with concise sentences backed by valid reasons. For instance, one should say: "Fences are painted when their paint starts to fade and peel. This is done partly for cosmetic reasons and also to protect them from decay; bare wood being subject to degradation by attack of fungi and bare metal being subject to attack by rust.". One should avoid simple, undefended, dogmatic, "declamatory" sentences such as: "Fence painting is the modern thing to do. Paint fences often."?
Questions:
1. Why is gold not good? (Answer in terms that Kenyesian economists have asserted.)
2. Why, in comparison to the above, are apples good? Refer to Adam Smith's resolution of the paradox of "marginal" value and utility. (diamonds and water parable)
3. Should gold be worth less than apples because it does not taste as good? Refer to 2.
4. Why should gold be good in a "banking monetarist" or "Keynesian" economic theory? Are gold's proponents being punished by the sale of gold? Refer to a behaviourist model of supply and demand.
5. What is gained by a bank exchanging gold for its own paper currency? Why are banks trying to gain that?
6. Are any commodities of such usage today that they threaten the economic progress of countries? Would you say that the usage or value of copper or diamond is a threat to mankind? Is the value of a commodity controlled or established completely by free market in most cases?
7. Is utility the only arbiter of worth in an ideal world? Is such a world without luxury definable or desirable?
8. Why did Ancient China abandon paper money? Is there a fiat currency system that could replace the Chinese model, that would not suffer any cyclic problems? Does this mean that a gold or gold coin currency system would not have such problems? How would you prevent these problems assuming they did occur.?
9. Is gold certificate money, such as is used or proposed to be used on the internet, an original idea of this age? If not, when might it have been employed and why, in terms of monetary and economic conditions, does it's use, or a like instrument's use, arise?
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