Functions and roles of money

Question 1

What is money?

Answer 1

A commonly accepted means of exchange for goods and services

Question 2

What are the 4 core functions of money in an economy

Answer 2

Unit of account
Means of exchange
Store of value
Legal tender

Question 3

How is money a unit of account

Answer 3

Acts as a common base of comparison for prices/recording debts. money provides a measure used to value different goods and services.

Question 4

How is money used as a means of exchange

Answer 4

Money is used to buy and sell goods and services or to pay debts

Question 5

What is store of value

Answer 5

Money can be spent now or saved until later allowing people to feel secure in the knowledge that they can spend their money in the future(inflation can affect this)

Question 6

How is money a legal tender

Answer 6

Legally recognised as a payment method for goods and services. This allows credit to be offered so payment takes place at future dates

Question 7

What does remaining solvent mean

Answer 7

Being able to have enough assets(things you own) to cover your liabilities(things you owe) whilst also being able to maintain your lifestyle

Question 8

What is inflation

Answer 8

General rise in prices or a fall in the value of money