Money

Question 1

What is trade?

Answer 1

The exchange of goods and services between different parties

Question 2

Why do people/countries trade?

Answer 2

Because it is impossible to produce everything you need to satisfy your wants and needs. It’s impossible to reach self-sufficiency

Question 3

Specialization definition

Answer 3

Each worker or firm specializes in different goods/services

Question 4

International specialization definition

Answer 4

each country specializes in different goods/services

Question 5

Main problem with barter system?

Answer 5

A double coincidence of wants is needed in order for the trade to succeed

Question 6

What are the 5 characteristics of money?

Answer 6

1) divisibiility
2) portable
3) durable (physically)
4) recognisable
5) scarce

Question 7

What are the 4 functions of money?

Answer 7

1) Medium of exchange
2) Unit of account (measurement of value)
3) Store of value
4) Standard for deferred payment

Question 8

Money –> Medium of exchange

Answer 8

swap of goods and services in exchange for money

Question 9

Money –> Unit of account

Answer 9

Money is used to account for the value of goods and services. Makes it possible to compare values of goods and services.

Question 10

Money –> Store of value

Answer 10

Money is used to save/store your wealth. Wealth can be stored in valuables like gold, jewelry, property or money.

Question 11

Money –> Standard for deferred payment

Answer 11

Allows to borrow money. Money can be used to pay off debts