Money Flashcards
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What is trade by barter?
Barter is the direct system of exchange of goods for goods and services for services.
What are the problems of trade by barter?
Problem of double co-incidence of wants
No fixed rate of exchange
Problem of indivisibility
Waste of time and effort
Does not encourage buying on credit
What is money?
Money is anything that is generally accepted as payment for goods or services and repayment of debts.
What are the functions of money?
Medium of exchange- Money can facilitate the exchange of goods/services without requiring a double co-incidence of wants.
Unit of account/Measure of value- Money allows us to compare and state the worth of different goods/services.
Store of value- Money retains its value, allowing us to save for future purposes.
Means of deferred payment- Money is an acceptable way to arrange terms of credit and repayment of debts. Money allows consumers to acquire a good in the present and pay for it later.
What are the characteristics of money?
Portability
Uniformity
Divisibility
Acceptability
Durability
Scarcity
What is good money?
Good money is a currency that is stable and can be used to measure the value of other goods and services.
What is deferred payment?
Deferred payments are purchases on credit.
What is credit?
Credit is a contractual agreement in which the borrower receives something of value immediately and pays for it later.
What is the meaning of terms of credit?
Terms of credit simply means the arrangement of lending money, especially the amount of money being given.
