1.1.5 - functions of money

Question 1

medium of exchange

Answer 1

Money is used to buy and sell goods & services. Workers accept payment in money because they know they can use the money for purchasing goods/services

Question 2

barter

Answer 2

trading one good or service for another. Requires double coincidence of wants - what one person wants is what the other person wants to sell

Question 3

measure of value

Answer 3

money acts as a unit of account e.g. if a banana costs 50p & an apple costs 25p then the value of one banana = the value of 2 apples

Question 4

a store of value

Answer 4

individuals do not spend all their earnings in one go. Instead they may defer some spending until the future.

Question 5

method of deferred payment

Answer 5

money can allow for debts to be created. People can pay for things without having money in the present, and can pay for it later. Relies on money keeping its value.

Question 6

cash

Answer 6

money in the physical form of currency

Question 7

money in current accounts

Answer 7

type of bank account that lets you receive money from anyone

Question 8

near money

Answer 8

liquid assets which are not cash but can easily be converted into cash - has store value

Question 9

liquid assets

Answer 9

an asset that can easily be converted into cash in a short amount of time e.g. cash, stocks

Question 10

time deposit

Answer 10

type of investment account where you keep your savings for a set amount of time