3.1 – Money and Finance Flashcards
What is Money?
A medium of exchange of goods and services.
Why do we need money?
We need money if we are to exchange goods and services with one another.
What is the barter system?
exchanging a good or service for another good or service
What were the problems with the barter system?
need for the double coincidence of wants, the goods being perishable and non-durable, the indivisibility of goods, lack of portability etc.
Why is money sucsessfull?
Money we use today in the form of currency notes and coins, which are durable, non-perishable, divisible, portable and is generally accepted
What are the functions of money?
Medium of exchange
Measure of value
Store of value
Deferred payment(purchases on credit)
What are banks?
Financial institutions that act as a intermediary between borrowers and savers.
What are commercial banks?
Banks that have many retail branches located in most cities and towns.
What are Central Banks?
Bank that governs all other commercial banks in a country
What are the functions of a commercial bank?
Accepting deposits of money and savings.
Aid customers in making and receiving payments.
Giving loans to businesses and private individuals.
Buying and selling shares on customer’s behalf.
Providing insurance
Exchanging foreign currencies.
Providing financial planning advice.
What are the functions of a central bank?
It issues notes and coins for the nation’s currency.
It manages all payments relating to the government.
It manages national debt.
It supervises and controls all the other banks
It is the lender of ‘last resort’ to commercial banks.
It manages the country’s gold and foreign currency reserves
It operates the monetary policy in an economy.
What is a stock exchange?
Business organization that enables individuals, companies and the government to buy and sell shares on the global stock market.
What are the functions of a stock exchange?
It brings together buyers and sellers of shares
It provides information on the market prices of stocks.
It supervises the conduct of firms of brokers that buy and sell shares on behalf of investors.
