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Economics iGCSE > 3.1 - Money and Banking > Flashcards

3.1 - Money and Banking Flashcards

1
Q

Specialization

A

The process of concentrating on and becoming expert in a particular subject or skill

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2
Q

Division of Labour

A

Is the separation of the tasks in any economic system or organisation so that participants may specialise

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3
Q

Bartering

A

Exchange (goods or services) for other goods or services without using money

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4
Q

Difficulties with barter (3)

A
  • fixing an exchange rate
  • finding someone to swap with
  • trying to save an abundance of resources
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5
Q

Four functions of money

A
  1. medium of exchange
  2. unit of account
  3. store of value
  4. standard of deferred payment
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6
Q

medium of exchange

A

anything that is used to determine value during the exchange of goods and services (usually money)

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7
Q

store of value

A

something that keeps its value over a period of time even if it is stored rather than used

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8
Q

unit of account

A

money measures the value of all goods and services / Money acts as a measurement of value

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9
Q

standard of deferred payment

A

money is acceptable to make purchases today that will be paid in the future

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10
Q

5 factors that make good money

A
  1. Acceptability
  2. Durability
  3. Portability
  4. Divisibility
  5. Scarcity
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11
Q

Acceptability

A

Anything can be used as money as long as it is generally acceptable

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12
Q

Durability

A

Any good used as money must be hard-wearing

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13
Q

Portability

A

Money should be easy to carry around

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14
Q

Divisibility

A

It must be possible to divide money of a large value into smaller values to make small purchases or to give change, without it losing value

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15
Q

Scarcity

A

A good money must be limited in supply or scarce if people and firms are to value it

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16
Q

Economic agents

A

Economic agents are economic decision makers

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17
Q

3 economic agents

A

Individuals/households, firms and the government

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18
Q

Individuals as an economic agent (3 examples)

A

buying goods and services; savings; paying rent

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19
Q

Firms as an economic agent (3 examples)

A

investing; producing products; paying salaries/wages

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20
Q

Government as an economic agent (3 examples)

A

infrastructure and transportation; providing public services; paying expenses

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21
Q

Financial asset

A

A non-physical asset whose value is derived from a contractual claim

22
Q

Financial asset (3 examples)

A

deposits; loans; stocks

23
Q

Liquid asset

A

An asset that can be easily converted into cash, in a short amount of time

24
Q

Liquid asset (2 examples)

A

cash; savings account

25
Q

Physical asset

A

Tangible asset which is either valuable in themselves or which produce value for the owner

26
Q

Physical asset (2 examples)

A

car; house

27
Q

The market for money

A

Is made up of all those people and organisations that want money, and all the people and organisations willing and able to supply money

28
Q

Financial Institution

A

Businesses that provide financial services to individuals, firms and the Government

29
Q

Services of Financial Institutions (name 4)

A
  • keeping money safe
  • making payments
  • borrowing money
  • making investments
  • exchanging currencies to buy from overseas
30
Q

Banks

A

Financial institutions that accept deposits and make loans; like any other business except they supply money; they are a financial intermediary

31
Q

3 services of (commercial) banks

A

loans; holding money in an account; deposits

32
Q

Commercial bank

A

A bank that offers services to the general public and to companies

33
Q

Central banks

A

An institution that oversees and regulates the banking system and controls the monetary base

34
Q

Demand for money (source)

A

From individuals and organisations

35
Q

Supply of money (source)

A

Mainly from the central banking system

36
Q

How do banks make money?

A

They gain the money from people holding the money in them, which they lend to others and gain profit from interest

37
Q

Functions of commercial banks (3)

A
  • charging interest on loans
  • charging fees for the provision of other financial services
  • making investments
38
Q

Functions of central banks (name 5)

A
  1. issues notes and coins for the nation’s currency
  2. manages payments to and from the Government
  3. manages national debt
  4. supervises the banking system, regulating the conduct of banks, holding their deposits and transferring funds between them
  5. is the ‘lender of the last resort’ to the banking system
  6. manages the nation’s gold and foreign currency reserves
  7. operates the government’s monetary policy
39
Q

Inflation

A

a general increase in prices and fall in the purchasing value of money

40
Q

Interest rate

A

the proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding

41
Q

Monetary policy

A

policies to control the supply of money, usually by manipulation of the interest rate to control demand and therefore control inflation

42
Q

Bonds

A

a loan from an investor to a borrower such as a company or government

43
Q

Stocks

A

a stock (also known as equity) is a security that represents the ownership of a fraction of a corporation

44
Q

Stock market

A

venues where buyers and sellers meet to exchange equity shares of public corporations

45
Q

Debt

A

a sum of money that is owed or due

46
Q

Loans

A

a thing that is borrowed, especially a sum of money that is expected to be paid back with interest

47
Q

Fiscal policy

A

the use of government revenue collection and expenditure to influence a country’s economy

48
Q

Gold standard

A

the system by which the value of a currency was defined in terms of gold, for which the currency could be exchanged

49
Q

Open market transaction

A

activities undertaken by a Central Bank in order to regulate the money supply in the economy

50
Q

Monetary reserves

A

cash and other reserve assets such as gold held by a central bank

Economics iGCSE (27 decks)

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