Money Flashcards
What characteristics does money have to have?
- durable
- portable
- divisible
- hard to counterfeit
- must hold value
- must be limited in supply
- must be generally accepted
What are the 4 functions of money?
- Medium of Exchange
- Store of Value
- Measure of Value
- Standard of Deferred Payment
“money it has functions four; medium, measure, standard store”
What is the difference between Current Account and Deposit Account
Current accounts can draw cash immediately and whenever but deposit accounts can’t.
Why do banks want you to keep the money in the bank for longer?
The longer the banks have with the money, the more they can invest and the more returns they can get.
How do banks incentivise people to save their money in banks for longer?
By increasing the interest rates (this also counteracts inflation).
What is the equation of exchange (Fisher’s equation)
Money Supply x Velocity of Currency = Price Level x Number of Transactions in a year
As velocity of currency and the number of transactions in a year are fairly constant, what directly affects eachother?
Money Supply and Price Level
What is the Primary Market?
When issuing shares to the stock market at an initial public offering.
What is the Secondary Market?
When the owners of the shares resell them on the stock market.
