12. Money

Question 1

What is ‘Money’?

Answer 1

Any agreed commodity that can be used as a medium of exchange for the purchase of goods and services

Question 2

What exchange systems were around before money?

Answer 2

Barter
Utu
Koha

Question 3

What is barter?

Answer 3

Exchanging goods and services for other goods and services

Question 4

What are the problems with Barter?

Answer 4

Difficult to measure value
Often bartering commodities are perishable
Difference in value

Question 5

What are the essential characteristics of Money? (5)

Answer 5

Universal acceptance
Divisible
Portability
Durability
Scarce in supply

Question 6

What are the 4 basic functions of Money?

Answer 6

Medium of exchange
Store of value
Measure of value
A means of deferred payment if paying with credit

Question 7

What makes up the money supply?

Answer 7

Physical currency
Financial institutions
Bank Savings

Question 8

Why might people spend?

Answer 8

Interest rates are low
Value can be stored better in purchased assets
Capital investment can ensure future revenues
They want to satisfy a need or want

Question 9

Why might people save?

Answer 9

Interest rates are high
Saving up to satisfy a need or want and don’t want to use credit
Values and beliefs
Lifestyle
Ability to save

Question 10

Why might people borrow?

Answer 10

Favourable interest rates making borrowing affordable
The need to satisfy a need or a want
Willingness to invest – property or capital machinery
The chance of a higher future return