Numeraire

AAA

DEFINITION of 'Numeraire'

An economic term that represents a unit of account. In French, the term means "money", "coinage" or "face value". A numeraire is usually applied to a single good, which becomes the base good. All similar goods are then valued and priced against the base good. This comparison makes it possible to identify which goods are worth more than others.

INVESTOPEDIA EXPLAINS 'Numeraire'

An example of a numeraire arises when we look at how currencies were valued under the Bretton Woods system during the mid-twentieth century. The U.S. dollar was priced as one-thirty-fifth the price of an ounce of gold. All other currencies were then priced as either a multiple or a fraction of the dollar. In this situation, the U.S. dollar acted as the numeraire because it was fixed to the price of gold.

RELATED TERMS
  1. Exchange Rate

    The price of a nation’s currency in terms of another currency. ...
  2. Currency

    A generally accepted form of money, including coins and paper ...
  3. Gold Standard

    A monetary system in which a country's government allows its ...
  4. Microeconomics

    The branch of economics that analyzes the market behavior of ...
  5. Bretton Woods Agreement

    A landmark system for monetary and exchange rate management established ...
  6. Economics

    A social science that studies how individuals, governments, firms ...
Related Articles
  1. Economics Basics
    Economics

    Economics Basics

  2. Understanding Supply-Side Economics
    Economics

    Understanding Supply-Side Economics

  3. A Primer On The Forex Market
    Options & Futures

    A Primer On The Forex Market

  4. How The Forex
    Forex News

    How The Forex "Fix" May Be Rigged

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center