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Flashcards in Money Deck (14)
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1

Money

anything which is generally acceptable as a means of payment for goods and services.

2

Barter

the direct exchange of one good/service for another good/service.

3

Liquidity

the extent to which a financial asset can be turned into cash.

4

Functions of Money in a modern economy

1) Medium of exchange
2) A unit of account
3) A store of value
4) A standard of deferred payment

5

Medium of exchange

An acceptable means of payment between buyers and sellers (no need for barter).

6

A unit of account

A measure of value that enables the value or prices of different products to be compared.

7

A store of value

A form of wealth that can be saved and spent at a later date.

8

A standard of deferred payment

Allows consumers to purchase today but pay back in the future (buying on credit).

9

Characteristics of money in a modern economy

1) Acceptable - Generally accepted in society.
2) Portable - Easy to carry around.
3) Scarcity - Needs to be limited to ensure it is valuable
4) Durable - Needs to be hard-wearing (last over time)
5) Divisible - Can be divided into smaller denominations
6) Stable value - Value needs to be fairly stable over time
7) Recognisable - Easily recognised to maintain confidence
8) Difficult to counterfeit - Hard to fake or copy

10

Functions vs Characteristics of Money

Functions of money - what it does.
Characteristics of money - what it is / what it is like.

11

Cash

notes and coins issued in a country which are legal tender. (Very Liquid)

12

Bank Deposits

deposits of money (often in electronic form) in financial institutions

13

Cheques

a method of payment that transfers money from one account to another

14

The reward for parting with liquidity

Interest
- If a person deposits cash in a savings account, which they can no longer use for a period of time, their reward is the additional sum of money (interest) they receive (plus their original deposit back).