Money, Banking and Credit

Question 1

What is Money?

Answer 1

A Medium of Exchange in the form of coins and banknotes.

Question 2

What was used for money before notes and coins?

Answer 2

Rum

Question 3

What is Currency?

Answer 3

A system of money in general use in a particular country.

Question 4

What is Bartering?

Answer 4

Bartering is the act of trading goods or services between 2 or more parties, without money

Question 5

Why is Bartering not used anymore?

Answer 5

Bartering is not used anymore because countries have stable economies, which enable us to buy goods and services. We also have greater employment.

Question 6

What is an exchange rate?

Answer 6

The value of one currency for the purpose of conversion to another.

Question 7

Why are exchange rates needed?

Answer 7

Because there are numerous currencies in the world and they are worth different values, so we need to exchange them and have a set value so that people don’t get ripped off.

Question 8

How do you convert Australian dollars into foreign currency?

Answer 8

Multiply by foreign currency exchange rate

Question 9

How do you convert foreign currency into Australian dollars?

Answer 9

Divide by foreign currency

Question 10

What are the functions of money?

Answer 10

Medium of Exchange, Store of Value, Standard of Deferred payment, Measure of Value.

Question 11

Define and Give an example of Money as a Medium of Exchange.

Answer 11

It is as the name states, no double coincidences. E.g. Ricky buys a new cricket bat from Bob for $350.

Question 12

Define and Give an example of Money as a Measure of Value.

Answer 12

It measures the value of all varieties goods. E.g. Joe goes to JB Hi Fi with $40. He is deciding whether to buy a pair of Headphones or 2 PS4 games.

Question 13

Define and Give an example of Money as a Standard of Deferred Payment.

Answer 13

Allowing goods and services to be acquired now and paid for in the future. E.g. I buy a computer of someone and will pay them back in 2 weeks.

Question 14

Define and Give an example of Money as a Store of Value.

Answer 14

Money can hold its value over time, in the form of banks. E.g. Saving $100 for the big Myer sale.

Question 15

What are the Characteristics of Money?

Answer 15

Durability, Divisibility, Transportability and Security.

Question 16

What is Durability as a Characteristic of Money?

Answer 16

The note can last for long periods of time and does not lose value through perishability and damage.

Question 17

What is Divisibility as a Characteristic of Money?

Answer 17

Can be split into smaller portions or larger portions for larger or smaller purchases.

Question 18

What is Transportability as a Characteristic of Money?

Answer 18

Easy to carry with you and is portable. Can carry hundreds of dollars in your pocket.

Question 19

What is Security as a Characteristic of Money?

Answer 19

Cannot be easily duplicated or counterfeited.

Question 20

What are Australian Banknotes made of?

Answer 20

Polymer Substrate

Question 21

What is Income?

Answer 21

Is what you earn from your job, wage or salary.

Question 22

What is Expenditure?

Answer 22

Spending money ‘Out Goings’

Question 23

What is Credit?

Answer 23

The ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future.

Question 24

What are the advantages of Credit Card?

Answer 24

If you need to pay for something but you don’t have enough money, you can use credit. They allow you to have money on you without carrying around cash or having to locate an ATM, they are very convenient.

Question 25

What are the disadvantages of Credit?

Answer 25

You can get into debt and the interest rate will only increase.

Question 26

What is a Debit Card?

Answer 26

A card allowing the holder to transfer money electronically from their bank account when making a purchase.

Question 27

What are the advantages of Debit Card?

Answer 27

Convenient like a credit card and it draws the money from your own funds so you are not running up a debt because you can only spend as much as you have in your bank account.

Question 28

What are disadvantages of Debit Card?

Answer 28

The disadvantages are that you can only spend as much as you have in your bank account. You can overdraw you account, which results in a bank charge.

Question 29

What is EFTPOS?

Answer 29

EFTPOS is an electronic payment system involving electronic funds transfers based on the use of payment cards, such as debit or credit cards, at payment terminals located at points of sale.

Question 30

What is Mortgage?

Answer 30

a legal agreement by which a bank, building society, etc. lends money at interest in exchange for taking title of the debtor’s property

Question 31

What is Interest?

Answer 31

Money paid at a particular rate for the use of money lent, or for delaying the repayment of a debt.

Question 32

How can the total interest bill for a loan be made smaller?

Answer 32

The total interest is smaller when it is paid off quicker, with a high monthly repayment.

Question 33

What is Principal?

Answer 33

Original sum invested or lent. Principal can be paid sooner by increasing your monthly repayment.

Question 34

What is a Transaction Account?

Answer 34

An account which is free to withdraw money and use a debit card to make payments, but with no interest

Question 35

What is a Savings Account?

Answer 35

An account that earns interest but costs to make withdrawals. No debit cards.

Question 36

What is a Term Deposit Account?

Answer 36

Where you leave a sum of money in this account for a period of time which you can’t touch but earns more interest.