Topic 1 - Purposes Of Money

Question 1

What is barter?

Answer 1

The exchange of goods, way of trading before money.

Question 2

The problems w bartering?

Answer 2

• Requires a ‘double coincidence of wants’.
• Difficult to decide how many units of a good should be exchanged for another

Question 3

Problem w items w intrinsic values?

Answer 3

• value of item varies/can change over time
• hard to make items divisible

Question 4

What are the 8 characteristics of money?

Answer 4

• acceptable
• recognisable
• stable
• divisible
• durable
• portable
• scarce but sufficient
• homogeneous

Question 5

What are the 4 functions of money?

Answer 5

• measure value (value of something is measured in terms of money)
• make payments (means of exchange)
• save (store of value for future use)
• borrow (a means of borrowing and repaying dept)

Question 6

What is inflation?

Answer 6

A sustained increase in the general price level.

Question 7

What are the uses of a current account?

Answer 7

• means of exchange (make a transfer, pay by direct debit/standing order)
• store of value (save money)
• borrow (e.g overdraft)

Question 8

Why use saving accounts?

Answer 8

• offer high rates of interest (however some require notice if account holder wishes to withdraw funds)