Microeconomic Decision Makers

Question 1

Money

Answer 1

Medium of exchange of goods and services

Question 2

Why do we need it

Answer 2

should be durable, Uniform, divisible, portable

Question 3

Function

Answer 3

• medium of exchange
• Measure of value
• Store of value

Question 4

Banks

Answer 4

financial institutions that act like a intermediary between borrowers and savers

Question 5

commercial banks

Answer 5

banks which aim to make a profit by providing a range of banking services to households and firms

Question 6

Centeral banks

Answer 6

a government-owned bank which provides banking services to the government and commercial banks and operates monetary policy

Question 7

Function of commercial banks

Answer 7

• Accept all deposits in form saving
• Aid customer in making & receiving payments via bank account
• Give loans to individuals and businesses
• provide insurance
• Exchange foreign currency
• provide financial planning advice

Question 8

function of centeral bank

Answer 8

• Issues notes and coins of national currency
• Manages payments relating Govt.
• Manages national debt
• Supervises & control all the other banks of the whole economy - holding debt transfering funds between them
• Central bank lends commercial banks money so they don’t go bankrupt
• operates monetary policy
• helps adjust exchange rates

Question 9

Consumption

Answer 9

buying spent on goods

Question 10

consumer expenditure

Answer 10

money spent on goods

Question 11

factors affecting consumption

Answer 11

• Disposable income: increase in disposable income increase of consumption of goods
• Wealth: increase in wealth increase in expenditure
• consumer confidence: If consumers are confident about the stability of their job and future income, encouraged to spend more
• Interest rate increase consumption and expenditure decreases

Question 12

Saving

Answer 12

Income not spent

Question 13

Factors affecting saving

Answer 13

saving for consumption - people save so they can buy something big later
Disposable income- If disposable income increases so does the amount people save
Interest rate - save interest rate increase over time longer you save more you get back
Consumer confidence - If consumer is not confident about their job
Availability of saving schemes banks offer many saving schemes

Question 14

Borrowing

Question 15

Factors affecting borrowing

Answer 15

Interest rate - person takes a loan he must repay the amount. Interest rate increase borrowing decrease
Wealth/Income - Banks more likely to lend to wealthy wealthy people than poor cause they can pay it back
consumer confidence - how people feel abt financial situation

Question 16

Why firms change demand for labour

Answer 16

• change in consumer demand for product
• Change in productivity of labour
• Change in price productivity of capital
• change in non-wage employment cost

Question 17

Why supply of labour might change

Answer 17

• change in quality of edu. & training
• Demographic change (pop.)

Question 18

factors that cause wage differentiates in the same job

Answer 18

• Discrimination
• length - how long they have worked a job
• local pay agreements
• Experience in that job