Money and Banking Flashcards
Chapter 18
what is the role of money?
money acts as the connection link in the exchange process.
what were disadvantages of the bartering system?
double coincidence of needs and wants, uncertainly of exchange rates, goods are not of uniform quality, problem of divisibility, specialisation and division of labour in the economy are discouraged
what are the characteristics of money?
recognisable, acceptable, portable durable, scarce, homogenous and fungible, can be subdivided into small units
what is the golden standard ?
a currency where notes are fully backed and redeemable in an equivalent amount of gold
define money!
anything that is generally accepted by people in exchange for goods and services or repayment of dept
what are the functions of money?
a medium of exchange,
a measure of value/ unit of account,
a standard for deferred payments,
a store of value/wealth
is money unique as a store of value?
no.
land, houses, jewelry, gold, boats, works of art,… can provide a better store of value
what forms can money have?
cash (notes and coins), cheques, electronic payments/ plastic money, automated teller machine (ATM) cards, debit cards, credit cards,
describe the evolution of our payment system!
barter - precious metals (gold and silver) - paper currency (fiat money) - cheques - electronic means of payment - electronic money (debit and credit cards) - internet banking
what/who is the ECB
european central bank
formed in Frankfurt, germany in 1998,
it works with the central national banks of each EU member states to formulate the European system of central banks (ESCB),
responsible for conducting monetary policy in the eurozone
what are the key functions of the ECB?
maintain price stability,
formulate and implement EU monetary policy,
hold and manage the official reserve of the euro area countries,
financial stability and supervision,
sole right to issue euro currency
what is monetary policy?
those actions by the ECB that influence money supply, interest rates and the availability of credit.
how can the ECB implement monetary policy within the eurozone countries?
- Monitoring the growth of money supplies ( relative to the value)
- engaging in open market operations,
- interest rates.
- use of standing facilities
- minimum reserve requirements
trough what ways has the ECB an immense impact on the Irish economy?
monetary policy ,
emergency liquidity assistance (ELA)
what is the role of the central bank in Ireland?
prints/issues legal tender, government bank, regulator of financial sector, official external reserves, maintains price stability, Financial stabiliy, provides costumer information, consumer protection, the banker's bank, lender of last resort
what are commercial banks?
instructions that provide deposit and lending services to personal consumers and businesses