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Why were people in the United States in the nineteenth century sometimes willing to be paid by check rather than with gold, even though they knew there was a possibility that the check might bounce?

Short Answer

Expert verified

People will accept checks due to lower transaction costs.

Step by step solution

01

Step 1. Introduction

Money is something that is used as a medium to make exchange in economic transactions. Apart from acting as a medium in facilitating trade, money serves other purposes such as acting as store of value.

02

Step 2. Explanation

People who would prefer to be paid by check rather than gold since checks were easier to transport than gold. People would frequently choose to be paid by check even if the check would bounce. In other words, people were more inclined to accept checks because of the lower transaction costs.

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