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    #1

    reduced the money supply

    Dear all,

    How to understand "reduced the money supply" specifically in the sentence?

    Does it mean "the demand for silver declined"?

    Thanks in advance.

    In 1873, however, Congress passed a bill that called for backing U.S. currency with gold only. Silver coins were out, and the Treasury quit buying silver at a fixed price. The move depressed silver prices, reduced the money supply, and created uncertainty in the economy.

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    #2

    Re: reduced the money supply

    Quote Originally Posted by Eartha View Post
    Dear all,

    How to understand "reduced the money supply" specifically in the sentence?

    Does it mean "the demand for silver declined"?

    Thanks in advance.

    In 1873, however, Congress passed a bill that called for backing U.S. currency with gold only. Silver coins were out, and the Treasury quit buying silver at a fixed price. The move depressed silver prices, reduced the money supply, and created uncertainty in the economy.
    The term money supply refers to the 'total supply of money in circulation in a given country's economy at a given time (Source).' The supply was reduced; there wasn't as much of a supply in circulation as their had been before.

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    #3

    Re: reduced the money supply

    In this case, you had paper money that was backed by real, physical gold and you had paper money backed by real, physical silver. You can not have more money than you have actual precious metal.

    When the gov't decided to only allow gold to back up money, then there would be less money. Because all of the gold would of course be less than that gold plus silver.

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