What is Standard of Value?

Standard of value is an agreed-upon worth for a transaction in a country's medium of exchange, such as the U.S. dollar or Mexican peso. A standard of value allows all merchants and economic entities to set uniform prices for goods and services. This st𝓰anℱdard is necessary in order to maintain a stable economy.

Understanding Standard of Value

Until the 20th century, gold was the standard of value in many countries. The U.S. went off the 澳洲幸运5开奖号码历史查询:gold standard domestically in 1934 and internationally in 1971. A a system of 澳洲幸运5开奖号码历史查询:floating exchange rates for currency is now used instead.

Typically, a standard of value is based on a 澳洲幸运5开奖号码历史查询:commodity that is widely known and used, allowing it to serve as a measure for other commodities. For example, metals such as gold, silver, copper, and bronze have been used across history as forms of currency and standards of value. Giving a set value to a specific quantity of gold—and then framing other commodities as multiples or fractions of that value—a𝔉llows for other disparate items to be gr𒊎anted value within the same economy.

How a Standard of Value is Applied

By using such standards, the value of other goods and services can be determined in a relatively consistent manner regardless o𒆙f the differences among those goods and services. The value of a luxury car, for example, can be set just as readily as the value of a pair of running shoes. The scale of value for these items is drastically different, as is their funct🍰ion and use. The establishment of a standard of value for currency, in particular, allows for easy exchange between individuals, merchants and customers, and businesses.

If an economy lacks such a standard of value, it may be common to see a 澳洲幸运5开奖号码历史查询:barter system employed to govern trade and commerce. This may mean the assigned value of goods or services could be highly subjective and variable. For example, without a standard of value, a farmer who produces vegetables may have to barter directly to acquire goods they need, such as lumber or fertilizer. The value of the vegetables offered in trade w🎀ould require some form of agreement between the parties, since a standard of value is not available to set parameters for the exchange.

Even with a standard of value, the assigned worth of a commodity may still fluctuate. The existence of the standard, however, m💞aintains a degree of cohesion and consistency across the economic system, barring a highly disr✤uptive influence on the market.