Money and money supply Flashcards
Money is divided in
Currency & deposit accounts
Currency is divided in
Coins & Bank notes
What is a legal tender?
A payment that cannot be refused (in Romania legal tender is LEU)
What are the types of money?
Commodity,representative, scriptural and fiat money
What is commodity money?
Commodity money are goods that can be considered as a form of currency: (Cows, potatoes, sheep etc)
What is representative money?
Representative money takes form of coins and bank notes.
What is Fiat money?
Fiat money is the most common currency and takes form of representative money that is a legal tender.
What is wealth?
Wealth is the total value of assets.
What is Income?
Income is the flow of earnings per unit of time.
What are the functions of money?
Money has 3 funcions:
- medium of exchange
- unit of account
- store of value
What does medium of exchange mean?
Money is a medium of exchange because it can be used to trade for goods and services:
Money has to be:
- widely accepted
- easy to carry
- does not deteriorate quickly
- must be divisible
What does unit of account mean?
Unit of account says that money is used to measure the value of things.
What does unit of account mean?
Unit of account says that money is used to measure the value of things.
What does unit of account mean?
Unit of account says that money is used to measure the value of things.
What does store of value mean?
Store of value says that money holds its value, it is perfectly liquid.
