Money Flashcards
define mooney
Money is anything that is widely accepted as a medium of exchange and can be used to measure and store value.
What are the primary functions of money?
- Medium of exchange
- Measure of value (unit of account)
What is fiat money?
Fiat money is currency that has no intrinsic value and is not backed by physical commodities but is recognized as legal tender by the government.
What is meant by legal tender?
Legal tender is money that is recognized by law as valid for payment of debts and obligations.
Distinguish between money and near money
Money- It is a medium of exchange that can be directly used for transactions.
Near money- It refers to assets that can be quickly converted into cash, such as bonds and fixed deposits.
What is the barter system, and how does money overcome its limitations?
The barter system involves the direct exchange of goods and services. Money overcomes its limitations by serving as a medium of exchange, eliminating the need for a double coincidence of wants.
Define the money supply.
Money supply refers to the total stock of money available in an economy at a given point in time.
State any two differences between commodity money and paper money.
- Commodity money has intrinsic value, whereas paper money does not.
- Commodity money is made from precious materials like gold, while paper money is made from paper or other low-cost materials.
What is the most liquid form of money?
cash
Which function of money helps in saving wealth for future use?
Store of Value
What is another term for plastic money?
Credit Card
Which component of money supply includes demand deposits and currency in circulation?
M1
Name one instrument classified as near money.
Fixed Deposit
What is the term used for money that derives its value from the trust and confidence of the public?
Fiat money
What is broad money?
Broad money (M3) includes narrow money plus time deposits in banks.
