Lesson 2

Question 1

What are the 4 functions of money

Answer 1

Unit Of Account
Means Of Exchange
Store Of Value
Legal Tender

Question 2

What is unit of account

Answer 2

Money serves as a base comparison. It is utilised to gauge or add value to certain items

Question 3

What is means of exchange

Answer 3

Money enables goods and services to be changed. This allows transactions to be favourable for both parties.

Question 4

What does means of exchange avoid

Answer 4

It avoids the problem of bartering which occurs due a double coincidence of wants

Question 5

What is a double coincidence of wants

Answer 5

This is essentially where both parties want something but their item is not a good transaction

Question 6

What is store of value

Answer 6

Money acts as a store of value over time.
This essentially means individuals can transfer spending to future time periods which applies security to purchases

Question 7

What is legal tender

Answer 7

Money is accepted to buy goods and services.
Therefore it is acceptable to exchange