Money

Question 1

Barter

Answer 1

Trading one good or service for another

E.g two traders and exchange 100 eggs fora goat

Requires double coincidence of wants I.e someone with 100 eggs prefers a goat must meet someone who has a goat but prefers eggs

Question 2

Commodity money

Answer 2

First type of money had instinsic values of own but do not require double coincidence of wants

E.g slaves , cattle , shells , gold

Use of money enables trade to take place more easily

Question 3

Representative money

Answer 3

Money backed by gold , held in bank but may be represented by something else for security

E.g early bank notes which can be take to the bank and exchanged for previous metals

Question 4

Token money

Answer 4

Money bears not relation of profitability to anything of intrinsic value ,can no longer be exchanged for previous metals

E.g modern day cash deposits

Question 5

4 functions of money

Answer 5

Median exchange or means of payments ( used to settle transactions )

Score of value (has to be able to transfer purchasing power in future)

Measure of value £/$/€

Standard of defered payment (credit or long term contracts)

Question 6

6 characteristics of money

Answer 6

Acceptable to all

Difficult to forge

Limited in quantity

Portable

Durable

Divisible