Term 1 Test Flashcards
Definition of Money
A current medium of exchange in the form of coins and banknotes
What are the three functions of money?
- Must be a standard unit of account
- Needs to be a medium of exchange
- Needs to be a store of value
What is meant by “standard unit of account”?
Money must have a standard and agreed value for measuring the value of goods and services.
What is meant by “medium of exchange”?
Money must be accepted by everyone as a means of payment
What is meant by “store of value”?
Money must retain its value over time
What are some different forms of money?
Cash, debit cards, credit cards, cheques, gift cards etc
What’s the difference between credit cards and debit cards?
Credit cards spend the banks money which is payed back with interest. Debit cards spend your own money that’s already in your account.
Advantages of credit card use:
- Convenient
- Good for emergencies
- Can buy something thats on sale
- Interest free loan if payed on time
- Rewards
Disadvantages of credit card use:
- High interest rates
- Hacking
- Over spending/impulse buying
- Excessive debt
How do you calculate AUD to a foreign currency?
$AUD x exchange rate
How do you convert foreign currencies into AUD?
Overseas amount / exchange rate
Who borrows money?
Ordinary people to businesses
Who lends money?
The bank
What are some reasons for borrowing money?
Renovations, holidays, education, cars houses
What are some types of loans?
- Home loan
- Personal loan
- Investment loan
- Overdraft
- Credit cards
