1.1 - Functions of money Flashcards
Acceptable
Key features of money – to be widely accepted
Barter
To exchange goods and services for other goods and services without money
Current Account
Bank or building society accounts where people can store money in forms of electronic balances and withdraw it to make payments
Denomination
Group of coins or banknotes that share the same face value
Divisible
Key feature of money - to be easily divided into amounts of different value
Double coincidence of wants
Actions when bartering, when 2 people both have goods or services they can trade and both want
Durable
Key feature of money - can be used in multiple translations without breaking
Face value
Value marked on a coin or bank note
fiduciary value
value based on trust of the banking system
homogeneous
key feature of money - to look and feel the same as money of the same denomination
inflation
rise in prices, meaning purchasing power of money falls
intrinsic value
The value that an item has in itself, eg a bag of rice has intrinsic value because it is a staple food; a solid gold coin has intrinsic value because it is made of a precious metal; a banknote does not have intrinsic value because it is a piece of paper or polymer.
legal tender
coins of banknotes that must be accepted if offered as a form of repaying debt
means of exchange
function of money - allows people to make payments
money
anything widely accepted as a form of making payments
payment mechanism
a means of transferring money from one account to another
portable
key feature of money - must be light and small
purchasing power
a quantity of goods or services that money can buy
purchasing power
a quantity of goods or services that money can buy
purchasing power
a quantity of goods or
rate of exchange
how much one item is worth in terms of an other item
recognisable
key feature of money - must be easily identified as real money
representational value
The value that an item represents rather than the value it has in itself: a banknote is just a piece of paper or polymer but it represents the value that is printed on it.
scarce but sufficient
key feature of money - to be available to in sufficient quantities to meet peoples needs but scarce enough so the value of money doesn’t fall
store of value
an attribute of money that allows people to store it and spend it at a later date
transaction
buying or selling something
unit of account
function of money - to allow people to compare prices and to measure the value of money in a bank account
