5302111
Description
Flashcards by Nikolas Reece, updated more than 1 year ago
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Created by Nikolas Reece
over 9 years ago
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| Question | Answer |
| money | anything that is acceptable as a means of settling debts |
| barter | the direct exchange of goods and services for other goods and services |
| barter's MAIN problem: double coincidence of wants | both traders must want the same thing that other person is trading |
| problem with barter: unequal value of exchange | the traders may have difficulty in determining the relative value of the goods to be exchanged. |
| problem with barter: difficult to save | some goods may be perishable or require significant space for storage |
| commodity money | consists of items used as money that are, in themselves, valuable. Eg are cigarettes, cattle, gold, silver and iron. |
| fiat (token) money | items that serve as money but which have no value in themselves eg the $20 bill can purchase $20 worth of items but the actual paper is not worth $20. |
| the gold standard | a monetary system where a country's currency or paper money has a value directly linked to gold |
| features of money: acceptabiity | easily acceptable, recognised as being genuine and not counterfeit |
| features of money: stability | its supply should not be too plentiful causing the value to fall or too little causing it to be scarce. |
| features of money: homogenous | features must be identical |
| feautes of money; portability | easy to move from one place to another |
| features of money: Durability | last for a relatively long time, not easily destroyed. |
| features of money: divisibility | easily divided into smaller amounts |
| features of money: leagal tender | the creditor is legally obliged to accept the money in settlement of a debt. |
| functions of money: a medium of exchange | can be used to purchase goods and services |
| functions of money: store of value | Money can be put away or saved for use at a later date. |
| functions of money: unit of account | the dollar amount (price) attached to a good or service gives an indication of its value to assess its worth |
| functions of money: method of deffered payment | the ability to consume a good or service in the present and pay for it in the future. Eg hire purchase |
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