Topic 1 - Purpose of Money Flashcards
What is a ‘double coincidence of wants’.
A ‘double coincidence of wants’ is when both parties have to agree to sell and buy each commodity that they are offering.
What is a ‘unit of account’.
A unit of account is a standard measure of financial value, for the value of goods and services and the financial assets that a person owns.
What does ‘homogenous’ mean?
Homogeneous means that all coins and banknotes of a certain denomination have to feel and look the same.
What does ‘scarce but efficient’ mean?
Scarce but efficient means that the supply of cash in an economy is stable, and that there is not too much cash in circulation.
What does ‘stable’ mean?
Stable means that money needs to hold its value so people can be confident that money will be worth the same or a similar amount in the future.
What is intrinsic value?
Intrinsic value is the value than an item has in itself, for example a solid gold coin has intrinsic value because it is made out of a precious metal.
What is representative value?
The representative value is the value that an item represents, rather than the value an item has in itself. For example, a paper £5 note has representative value because it is recognised as a value of money which can be used to purchase things, as it is made out of paper it has no intrinsic value.
What is a ‘store of value’
A store of value is money that is saved for future uses. For example, people save money in banks and building societies for future uses.
What is ‘purchasing power’
Purchasing power of money is the quantity of goods and services it can buy.
