Functions And Roles Of Money

Question 1

What are the 4 main functions of money

Answer 1

• unit of account
• means of exchange
• store of value
• legal tender

Question 2

What is means of exchange?

Answer 2

Allows trade between items

Question 3

What is unit of account?

Answer 3

Gives value to an item, e.g. Car 30k, chocolate bar 1£

Question 4

What is store of value?

Answer 4

Allows future purchases

Question 5

What is legal tender?

Answer 5

Can be used anywhere - legally recognised

Question 6

What is someone in their childhoods “financial needs”

Answer 6

Toys and sweets

Question 7

What are the consequences of someone in their childhoods “financial needs”

Answer 7

• spend what you have
• don’t need to save
• savings accounts will be opened by grandparents

Question 8

What is someone in their adolescences “financial needs”

Answer 8

• clothes
• transport
• going out
• first bank account

Question 9

What is someone in their adolescence consequences to their “financial needs”

Answer 9

• part time jobs
• allowance
• becoming financially independent

Question 10

What are young adults “financial needs”

Answer 10

• food, rent, tuition fees, social events, car

Question 11

What are young adults consequences to their “financial needs”

Answer 11

• student loans, parents allowance, jobs (part time), credit cards, overdraft

Question 12

What are middle aged people’s “financial needs”

Answer 12

Save for retirement, save for kids future, holidays

Question 13

What are consequences to middle aged “financial needs”

Answer 13

Mortgage, food, supporting kids, car(s),

Question 14

What are old age people’s “financial needs”

Answer 14

Pension, downsizing

Question 15

What are consequences to old aged people’s “financial needs”

Answer 15

No mortgage, no income (apart from pension), give money to family

Question 16

What are some features that will impact someone’s attitudes to money

Answer 16

Actual income, personal attitudes, parents influence, geographical location/culture

Question 17

What is money?

Answer 17

A method of exchange, typically in the form of any combination of coins and bank notes.

Question 18

What factors influence the role of money?

Answer 18

Attitudes to risk + reward, culture
religion and ethical beliefs
Life stages
life events
external influences
interest rates

Question 19

What is an example of how attitudes influence the role of money?

Answer 19

If the individual is risk adverse, they will have more positive attitudes towards saving and spending what they have, however if the individual is risk favourable they will feel more positively towards borrowing, spending money on credit cards

Question 20

What is an example of how culture, religion and ethical beliefs can influence the role of money?

Answer 20

Islamic finance

Question 21

What is Islamic finance?

Answer 21

Shariah finance states that money has no intrinsic value, but purely a medium of exchange. Money cannot be made from money (cannot charge interest) but through trading of goods and services.

Question 22

What is an interest rate?

Answer 22

A percentage cost of borrowing money or percentage return on lending or saving money. The higher the percentage, the higher you must pay back.

Question 23

What is an inflation rate?

Answer 23

The rate of increase in prices rising over time

Question 24

What are two examples of how life events can affect finances and the role of money?

Answer 24

Getting married - lots of money will be spent therefore higher chances that borrowing will occur
Fear of redundancy - uncertainty about the future may lead to an increase in savings and avoidance of borrowing.

Question 25

What is the main external influence that will affect the role of money?

Answer 25

Economic state of the country

Question 27

How does the economic state of the county affect the role of money?

Answer 27

As consumer spending will increase + decrease therefore prices will change.

Question 28

What is economical growth?

Answer 28

When the country’s economy is producing more goods + services

Question 29

What is an economical boom?

Answer 29

When there is rapid and sustained economic growth, e.g. low unemployment rates and high consumer spending

Question 30

What is an economic slump?

Answer 30

Where there is a noticeable decline in production, sales and growth in a county

Question 31

What is an economic recession?

Answer 31

A period of decline in economic activity, e.g. low GDP, low employmentent rates and overall economic output.

Question 32

How do interest rates affect how consumers use money?

Answer 32

It will adjust the costs of borrowing or reward for saving .

Question 33

What happens to cost of borrowing and reward for saving if interest rates increase?

Answer 33

Costs of borrowing increases, reward for saving also increases

Question 34

What happens to costs of borrowing and reward for saving if interest rates decrease?

Answer 34

Costs of borrowing decrease, rewards for saving also decrease.