money and banking

Question 1

what is money

Answer 1

Money is any commodity
that can be used as a
medium of exchange for
the purchase of goods and
services

Question 2

what are the different forms of money

Answer 2

cash, bank deposits and central bank reserves

Question 3

what are the different functions of money

Answer 3

• Money acts as a medium of exchange
• Money is a measure of value
• Money is a store of value
• Money is a standard of deferred payment

Question 4

what are the different characteristics of money

Answer 4

• durability
• acceptability
• divisibility
• uniformity
• scarcity
• portability

Question 5

what is bartering

Answer 5

Bartering is the act
of swapping items in
exchange for other items
through a process of
bargaining and negotiation,
due to the absence of
money in the economy

Question 6

what is a central bank

Answer 6

The central bank of a
country is the monetary
authority that oversees and
manages the economy’s
money supply and banking
system

Question 7

what is a commercial bank

Answer 7

A commercial bank is a
retail bank that provides
financial services to its
customers

Question 7

Central banks tend to have the following four key functions:

Answer 7

• The sole issuer of banknotes and coins
• The government’s bank
• The bankers’ bank
• The lender of last resort

Question 8

what are the primary functions of commercial banks

Answer 8

• accepting deposits
• making advances
• credit creation

Question 9

what are the secondary functions of commercial banks

Answer 9

Collecting and clearing cheques on behalf of their clients.

Offering additional financial services such as tax advice, foreign exchange
dealings and the buying and selling of shares.

Providing safety deposit boxes for customers to safeguard highly valued
possessions, including jewellery and important documents such as wills.