Money Flashcards
What are the 7 characteristics of money?
- durability
- portable
- divisible
- hard to counterfeit
- acceptable
- valuable
- scarce
What are the 4 functions of money?
- medium of exchange
- measure of value
- standard of deferred payment
- store of values
What is medium of exchange?
Allows goods one services to be traced without the need for barter
What is the primary capital market?
Where shares are issued
What is a capital secondary market?
Where existing shares are bought / sold
What are the 2 types of foreign exchange markets?
Spot market and forward market
What does the money market consist of?
Loans, FTSE
What is the correlation between bond prices and bond yields?
Inverse, if a bond yield rises it becomes less attractive
What are the 2 types of bank account?
Current and savings
What is the current account?
- Can withdraw anytime
- often no/little interest
- known as narrow money (can spend anytime)
- bank market failure = moral hazard
What is a savings account?
- Time/deposit account
- Term account
- usually limited withdrawals
- usually with interest
- known is broad money (wait to spend)
What is a creditor?
Loans money
What is a debitor?
Borrows money
How do commercial banks make money?
Person 1= saves £100
Person 2= borrows £100
Person 2= repays back with 10% interest: £110
Person 1= receives £105 in return for saving
Bank = keeps a £5 profit on the interest
