The Functions of Money Flashcards Preview

ECONOMICS -THEME 1 : Introduction to markets and market failure > The Functions of Money > Flashcards

Flashcards in The Functions of Money Deck (24)
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1
Q

What is money?

A

Anything that is normally acceptable in the payment of goods and services, or of a debt.

2
Q

Name the 4 functions of money

A
  1. A medium of exchange
  2. A measure of value
  3. A store of value
  4. A method of deferred payment
3
Q

Define ‘a medium of exchange’

A

Enables buying and selling of products, making exchange easier, avoids a DOUBLE COINCIDENCE OF WANTS, eliminates the need to barter.

4
Q

Define ‘a measure of value’

A

Enables value to be placed on products so can be bought and sold with ease. Money creates unit of measure that enables comparisons between relative value of products.

5
Q

Define ‘a store of value’

A

Convenient way of storing wealth, spent at a later date. Money will hold its value in the short term as long as inflation remains low.

6
Q

Define ‘a method of deferred payment’

A

Enables borrowing and lending. A price is usually set for borrowing and lending; this is the rate of interest.

7
Q

Name the different forms of money

A
  • Notes and coins
  • Current accounts
  • Time deposits (near monies)
8
Q

Name the forms of money ‘a medium of exchange’ comes under

A
  • Notes and coins

- Current accounts

9
Q

Name the forms of money ‘a measure of value’ comes under

A
  • Notes and coins
  • Current accounts
  • Time deposits (near monies)
    (ALL FORMS)
10
Q

Name the forms of money ‘a store of value’ comes under

A
  • Notes and coins
  • Current accounts
  • Time deposits (near monies)
    (ALL FORMS)
11
Q

Name the forms of money ‘a method of deferred payment’ comes under

A
  • Notes and coins

Current accounts

12
Q

What is near money?

A

Assets which fulfil some but not all the functions of money.

13
Q

What forms of money do near monies act as?

A

Measure of value and store of value

14
Q

What can near money be converted into?

A

A medium of exchange quickly and at little cost.

15
Q

What is liquidity?

A

The ease with which an asset can be converted into money without loss of value

16
Q

What are money substitutes? (examples)

A

Anything which can be used as a medium of exchange but which is NOT a store of value e.g. credit cards and charge cards

17
Q

Describe the DOUBLE COINCIDENCE OF WANTS

A

Finding someone to exchange needs with, nowadays, don’t have to find someone with the same wants so use money as the exchanging factor instead.

18
Q

What is the value of money influence by? (3 things)

A
  • Interest rates
  • Amount of money printed
  • Inflation rates
19
Q

What are time deposits a type of?

A

Near money

20
Q

Name some examples that count as ‘money’?

A

Cash and current account deposit (balance)

21
Q

Name some examples that count as ‘Near money’ and why?

A

Savings accounts due to interest rates and high restrictions

22
Q

Name some examples that count as ‘Non-money financial assets’?

A

Shares

23
Q

Name some examples that count as ‘Non-money physical assets’?

A

Car, House, Gold necklace

24
Q

Name something that is not an asset?

A

A credit card