Unit 3

Question 1

State the 4 functions of money

Answer 1

1. Unit of account
2. Means of exchange
3. Store of value
4. Legal tender

Question 2

What is meant by the term solvent

Answer 2

The ability to meet day-to-day expenditure and repay debts

Question 3

Advantages of cash

Answer 3

1. Most widely accept form of exchange
2. Physical not virtual
3. Consumers feel confident when using
4. Makes budgeting easier

Question 4

Disadvantages of cash

Answer 4

1. Cash can be easily lost or stolen
2. May have an emergency but not enough cash to cover cost

Question 5

Advantages of debit card

Answer 5

1. No need to carry cash
2. Secure method of payment with low risk of theft
3. Widely accepted

Question 6

Disadvantages of debit card

Answer 6

1. Short time lapse between making the transaction and the money being withdrawn from the customers account may result in overspending
2. Not accepted or appreciate for small transactions

Question 7

Advnatges of credit card

Answer 7

1. Allows a period of credit that is interest free, e.g. one month
2. Most cards are widely accepted
3. Loyalty schemes are often offered e.g. collect points or cash back

Question 8

Disadvantages of credit cards

Answer 8

1. Interest is charged on balances not paid
2. Off within a month
3. Can encourage a customer to overspend

Question 9

Advantages of a check