Do you know what Store of Value is? If not, this article is for you. Today we will talk about Store of Value in Economics and what is an example of store of value. Let’s find out by reading the article below.
What is Store of Value in Economics?
A store of value is an asset that does not depreciate in value. Gold and silver are good examples because their shelf life is basically permanent. Food and vehicles are not stores of value because they depreciate quickly and lose their value. A store of value is something that you can exchange now or in the future for something else and expect it to retain its value. The U.S. dollar is considered a store of value because its value does not change. Treasury bonds are also a good store of value. They are backed by the U.S. government, which pays interest, and at maturity, bondholders get back all of their principal.
What is an example of store of value money?
Currency
A reasonably stable currency is essential to a healthy economy. A country's currency must be a reliable store of value for its citizens to work and trade, save and spend. A monetary unit that does not serve as a store of value destroys any incentive to save or even earn money, and reduces the ability to transact.
Precious metal
Throughout history, many economies have used gold, silver, and other precious metals as currencies because of their ability to store value, relative ease of transportation, and ease of exchanging them for currencies of different denominations. In fact, until 1971, the United States was on the gold standard, which meant that dollars could be exchanged for a specific weight of gold.
President Richard Nixon ended dollar convertibility to give the Federal Reserve (Fed) more power to influence factors such as employment and inflation. Since then, the United States has used fiat currency, which the government declares to be legal tender, but is not pegged to a commodity of value.
I hope this article will help you to learn Store of Value in Economics and what is an example of store of value. The composition of a store of value can vary significantly across countries and cultures. In most advanced economies of the world, the local currency can be considered a store of value in all but the worst-case scenarios.
