A1 Functions and role of money - the role and function of money Flashcards
what are the 4 functions of money ?
store of value,
legal tender , unit of account and means of exchange.
what is meaning of unit of account ?
It allows us to place a monetary value on goods and services.
what is the meaning of store of value ?
money allows us to use it in the future as it keeps its value
what is the meaning of Means of Exchange ?
money allows us to trade. businesses and customers can buy and sell goods and services using money.
what is the meaning of legal tender ?
money is a legally recognised form of payment, it is widely recognised and used for all sorts of transactions.
what are the factors that affect the role of money ?
Personal attitudes.
Culture
Life events.
External influences.
Interest rates.
Life stages.
what are some personal attitudes of borrowing money .?
some people like to live within their means and only buy what they can afford.
whereas other people might be happy to buy on credit or to borrow money in order to get what they want sooner rather than later.
what are some cultural views towards money ?
different cultures have different beliefs and attitudes about money .
The older generation of Chinese people have a culture of saving.
how life events affect whether the individuals uses money ?
some events may be within an individuals control such as travelling , going to university , getting married and starting a family.
some events may be outside of the individuals control.
such as illness , financial losses.
how external influences affect money ?
the state of the economy will impact on job availability , wages and prices of goods and services.
decisions made by the government can affect the amount of tax people have to pay.
how do interest rates affect money ?
when interest rates are low the individual may be more willing to borrow money or spend on credit.
When interest rates are high , the individual may likely to save their money instead of spending their money.
