A1 Functions and role or money

Question 1

Functions and role of money

Answer 1

The ability to handle money received, and to control money paid, is a fundamental requirement for personal and business success. This success relies understanding what ‘money’ is.

Question 2

Functions of money

Answer 2

• unit of account
• means of exchange
• store of value
• legal tender

Question 3

Role of money is affected and influenced by a number of factors

Answer 3

• personal attitudes towards risk and reward, borrowing, spending and saving
• life stages
• culture, including religious and ethical beliefs
• life events
• external influences/trends and the financial-related effects
• interest rates, cost of borrowing versus reward of saving

Question 4

Planning expenditure, common principles to be considered in planning personal finances

Answer 4

• to avoid getting into debt
• to control costs
• avoid legal action/repossession
• remain solvent
• maintain a good credit rating
• avoid bankruptcy
• to manage money to fund purchases
• generate income and savings
• set financial targets and goals
• provide insurance against loss or illness
• counter the effects of inflation