Module 8/9 Flashcards
(23 cards)
Define the first cheques
Gold - deposited and kept at the goldsmith for safekeeping
Describe the functions of money
Means of exchange (we can use in exchange for anything)
Until of account (has standard value that everyone agrees on)
Store of wealth (has to be something that can be stored/used at a later date)
Means of postponing (with money we can pay at a future date)
What are the characteristics of money?
Portable (able to carry around easily)
Divisible (have to be able to pay different amounts)
Limited in supply (a lot of something - no need for it)
Durable/Longlasting (for something to be used as money it has to last)
Homogenous (has to be the same for everyone)
Acceptable (must be something everyone accepts and wants)
Reliable (something we can be sure of can be used as a payment for something else)
Define the 3 types of money
Narrow money (being used in bank current notes) Quasi money (in savings account/long term deposits account) Broad money (narrow money + quasi money)
Why do people want money?
Transactions (buys good/services)
Save (for future needs/safety)
Invest (make more money)
What is the opportunity cost of money?
Using money to buy goods/service - you are the benefit of investing it + earning it
What are the current transfers?
Transfers in and out of a country
What is the current account?
Measures how well a country’s doing in international trade on goods and services, either +ve (money coming into the country) in the red. -ve (money going out of the country) in the black.
Explain the main components of current account
Visible trade (buying/selling goods, exports +ve , imports -ve) Invisible trade (imports/exports of services +ve,-ve)
What are the balance of payments?
Imports (bring/buy goods/services from abroad - paying abroad - money going out)
Exports (selling goods/services abroad - money coming into the country)
What are profits?
Those earned by companies (money)
What is the equation?
Visible exp - visible imp =
Invisible exp - invisible imp =
Visible balance + invisible balance =
What is the financial account?
Records money inflows/outflows
What does it contain?
The financial account
- Long term investment- physical assets
- Portfolio - financial transaction
- Financial derivatives- forward foreign exchange contracts
- Other investments - deposits in Malta by foreigners
- Reserve assets- holdings in foreign currency /gold reserve
What is the capital account?
Includes in flows and outflows of money (change of ownership of long term assets)
Sale of long term assets
Cancellation of debts
What is a balance of payments surplus/deficit?
When the capital and current account should cancel each other out
What is a balance of payment deficit?
This means that inflows of money are less than outflows (overspending)
What is a balance of payment surplus?
More inflows than outflow
How can govt. fix decider?
Deflation (govt. raises taxes)
Interest rates (raised makes foreigners want to invest in Malta)
Protectionism (govt prevents trade between countries )
Devaluation (govt. lowers value of currency)
What are the problems with barter?
A double coincidence of wants Is needed
Finding fair exchange is hard
Some items are difficult to ‘divide’
Euro
Single currency used by most countries in the European Union which promotes economic stability and growth
Advantages of Euro
- Eliminates exchange rate fees - more stable environment
- Increased incentive to invest
- Lessens uncertainty / risks
- Use of a single currency in international makes Europe a strong partner to trade with
Disadvantages of Euro
- Loss of control over monetary policy
- Change over cost of converting
- Education campaigns
- Losing maitojal identity
- Ptrouble to adapt for some people
