Unit 1 Topic 1 Flashcards
Define what it means to ‘barter’
To exchange goods and services for other goods and services without using money.
What are current accounts?
Bank or building society accounts where people can store their money in the form of electronic balances and withdraw it to make payments.
Define ‘denomination’
A group of coins or notes that share the same face value.
Explain ‘double coincidence of wants’
A situation in which two people have goods or services to trade and each wants what the other one can provide.
Define ‘face value’
The value marked on a coin or note (eg 1p, 2p, 5p, £5, £10).
Define ‘fiduciary value’
Value based on trust in the banking system.
Define the term ‘homogeneous’
A key feature of money - to look and feel the same as other coins and notes of the same denomination.
Define the term ‘acceptable’
One of the key features of money - to be widely accepted.
Define the term ‘divisible’
A key feature of money - to be easily divided into amounts of different value.
Define the term ‘durable’
A key feature of money - to be strong enough to be reused in many transactions.
What is meant by inflation?
A rise in prices, leading to the purchasing power of money falling.
Define ‘intrinsic value’
The value that an item has in itself (eg a banknote does not have intrinsic value because it is a piece of paper or polymer).
Define ‘legal tender’
Coins or banknotes that must be accepted if offered in payment of a debt.
Define the term ‘means of exchange’
A function of money - to allow people to make payments.
Define ‘money’
Anything widely accepted as a means of making payment.
Define the term ‘payment mechanism’
A means of transferring money from one account to another (eg debit card, cheque)
Define the term ‘portable’
A key feature of money - to be small and light enough to carry around easily.
Define ‘purchasing power’
The quantity of goods or services that money can buy.
Define ‘rate of exchange’
How much one item is worth in terms of a different item.
Define the term ‘recognisable’
A key feature of money - to be easily identified as genuine money.
Define ‘representational value’
The value that an item represents rather than the value it has in itself: a banknote is just a piece of paper or polymer but it represents the value that is printed on it.
Define the term ‘scarce but sufficient’
A key feature of money - to be available in sufficient quantities to meet people’s needs but not in such quantities that the value of money falls.
Define ‘store of value’
An attribute of money that allows people to store money now and spend it later.
Define ‘transaction’
Buying or selling something.
Define ‘unit of account’
A function of money - to allow people to compare prices and to measure the value of money in a bank account.
Define ‘unemployment rate’
The % of economically active people unable to find work.
What is a savings account?
An interest bearing account held at a financial institution.
Explain what an overdraft is
An agreement to overspend your account up to a set amount.
Explain what it means to be insolvent
Being unable to pay debts as liabilities are greater than assets.
Define external influences
Factors outside the control of the individual. eg rate of inflation
Explain what it means to become redundant
Becoming unemployed because your job no longer exists.
Explain what it means to experience a recession
Two periods of negative economic growth.
Explain what a budget is
A financial plan showing a person’s income and expenditure over a set period of time.
Explain what interest rates are
The cost of borrowing or the reward of saving.
What situation does bartering rely on?
The bartering system relies on a ‘double coincidence of wants’ (a situation in which two people have goods or services to trade and each wants what the other person can provide)
What is LETs?
A local network that enables people to exchange goods and services with each other without using money.
Give 4 features of money
Acceptable
Recognisable
Stable
Divisible
Durable
Portable
Scarce but sufficient
Homogeneous
Describe the relationship between inflation and purchasing power
As inflation rises, purchasing power falls.
What is the current base rate of interest in the Uk?
5.25%
What is the current rate of inflation as measured by the CPI?
6.8%
What items were used by communities in the past as a means of payment?
Cowrie Shells
Feathers
Leather
Oxen
Pigs
Stones
Salt
Vodka
Name 2 limitations of early money forms
Some items were not divisible
Some items not durable (eg pigs and cows)
Name the 4 functions of money
Measure value
Make payments
Save
Borrow
The same goods can cost different prices in different countries - why is this?
The cost of living
Wage rates
Taxation
