3.1 Money and Finance Flashcards
Explain two problems with the barter system
- fixing a rate of exchange
2. Finding a double coincidence of wants
Define Money
Money a generally accepted medium of exchange and a good store of value.
For money to work it must be… (4)
A widely accepted medium of exchange
A reliable measure of value (unitary value for all goods)
A good store of value (doesn’t perish, good size)
A means of differed payments
Ps our money is a good store unless hyperinflation occurs
Characteristics of good Money (what makes it a good source of value)
Acceptable Durable Portable Divisible Scarce (most important one)
What are Physical Assets?
A store of value like jewelry or a house.
Describe the key feature of a Bank
Financial intermediary (brings together customers who want to save and customers who want to borrow)
How do banks make money?
Loan interest
Fees for currency exchange
Fees for ATMs
Profits from investments with saved money
What do interest rates determine?
The price of borrowing or saving money.
List the types of banks…
Investment Banks Commercial Banks Mutual Societies Islamic Banks Credit Unions
‘ICMIC’
Describe the role of an investment bank
Helps large businesses raise money from the stock market
Describe the services provided by Commercial Banks (8)
Large banks with retail branches all over: Accept deposits of money and savings Short-term personal and commercial loans Long term loans or mortgages Buy and sell shares Provide insurance cover Operate pension funds Financial and tax planning advisors Storing valuables Exchange foreign currency Cheque, credit card and debit card accounts Work with sharia law investments too
Describe the role of mutual societies
Specialize in providing mortgages for property
Have commercial bank services nowadays
Describe the features of Islamic Banks (4)
Compliant with Sharia Law
No interest
Share profit
Charge fees
Describe the features of Credit Unions
Co-operatives
Non-profit
Give small businesses loans
Have commercial services too nowadays
Functions of the central bank? (6)
.Issuing notes and coins for currency
.Payments to and from government account
.Stabilizing the value of national currency
.Managing National Debt
.Regulating bank conducts and transferring funds between them
.Operating the monetary policy
