chapter 16 - money and banking Flashcards
1
Q
definition of:
money
A
commodity that can be used as a medium of exchange for purchase of goods and services
2
Q
forms of money?
A
- cash
- bank deposits
- central bank reserves
3
Q
functions of money
A
- medium of exchange
- store for value
- standard of deferred payment
- measure of value
4
Q
characteristics of money
A
durability uniformity divisibility portability acceptability scarcity
5
Q
definition of:
bartering
A
act of swapping items in exchange for other items through a process of bargaining and negotiation due to the absence of money
6
Q
definition of:
central bank
A
monetary authority that oversees and manages the economy’s money supply and banking system
7
Q
functions of central bank
A
- government’s bank
- lender of last resort
- banker’s bank
- sole issuers of banknotes and coins
8
Q
definition of:
commercial bank
A
retail bank that provides financial services to its customers
9
Q
functions of commercial banks
A
- accepting deposits (sight deposits - deposits payable on demand; time deposit - deposits payable after a fixed time period)
- making advances
- credit creation (bank increasing money supply by making money available to borrowers)
- collecting and clearing cheques on behalf of their clients
