Money Flashcards
What is Money?
Money Refers to a commodity that is widely accepted as a Medium of Exchange
What are Functions of Money ?
Medium of Exchange
Store of Value
Unit of Account
Standard of Deferred Payment
What are Characteristics of Money ?
Durability Acceptability Portability Scarcity Uniformity Divisibility
What is Bartering ?
Bartering is the act of swapping Items in exchange for each other through bargaining and negotiation
What are Problems with Bartering ?
Requires Double Coincidence of Wants
Divisibility
Portability
What are Central Banks ?
The Monetary Authority that oversees and manages the countries Money Supply and Banking System
What are the Functions of Central Banks ?
Issue Legal Tender Bankers Bank Governments Bank Lender of the Last Resort Set Monitoring Policy / Interest Rate
What is Liquidity ?
Liquidity is the ability to convert Assets into Cash
What are Commercial Banks ?
A Bank that Provides Financial Services to Customers
What are the Primary Functions of Commercial Banks ?
Accepting Deposits
Making Advances - Overdraft and Mortgage
Credit Creation - Increase Purchasing Power by Increasing the Money Supply in an Economy
What is Overdraft ?
Overdraft is the withdrawal of an amount that is Higher than in the Account. Only for Approved Customers/ Businesses
What is Mortgage ?
Mortgages are Long Term Loans of Appreciating Assets ( Land and Property )
What are Secondary Functions of Commercial Banks ?
Collecting and Clearing Cheques Offering Additional Financial Services Safety Deposit Boxes Offering Money Transfer Offering Additional Credit Card/ International Banking Facilities
What is Disposable Income ?
Disposable Income is the Amount of Money a Person has available to spend after Taxes
What is Current Expenditure?
Current Expenditure is Money Spent on Items consumed within the Year
What is Capital Expenditure ?
Capital Expenditure is Money Spent on Assets lasting 12 Months or More
What is Wealth
Assets - Liabilities
What is the Positive Wealth Effect ?
Positive Wealth Effect is when The Value of Assets Increase
What is Conspicuous Consumption?
When People Purchase Items to increase their Status or Image ( Luxury Goods )
What is Negative Equity ?
Negative Equity is when the Value of Loan exceeds Market Value of the Property
What effect will Higher Interest Rates Have on Borrowing, Saving and Spending ?
Higher Interest Rates will reduce Borrowing, and Spending and Increase Saving
What effect will Lower Interest Rates Have on Borrowing, Saving and Spending ?
Lower Interest Rates will result in Increase in Borrowing and Spending, and Decrease in Saving
What effect will Confidence Levels in the Economy Have on Borrowing, Saving and Spending ?
Higher Confidence Levels in the Economy will increase Borrowing and Spending,as People will Be buying and Firms will be Investing, while Savings will Decrease. If there is Low Confidence, Borrowing and Spending will reduce, as People will want to Save, so Savings will Increase
What effect will Inflation have on Borrowing, Saving and Spending ?
Inflation will reduce Purchasing Power, reducing Spending and Saving, while Increasing Borrowing.
Decrease in Inflation will increase Purchasing Power, reducing Borrowing and Increasing Spending and Saving
