Unit 3 A1

Question 1

What are the four core functions of money

Answer 1

Unit of account
Means of exchange
Store of value
Legal tender

Question 2

Unit of account

Answer 2

Money provides a measure by which we can value products. It is the common base of comparison to present prices and record debt.

Question 3

Means of exchange

Answer 3

Money enables goods to be exchanged, transactions to be settled and debt to be paid.

Question 4

Store of value

Answer 4

Enables individuals to transfer spending to future time periods secure in the knowledge that it will have a future value.

Question 5

Legal tender

Answer 5

Accepted to buy goods and services. Seen as valid in the eyes of government.

Question 6

Six factors affecting the role of money

Answer 6

Personal attitudes
Culture
Life stage
Life event
External influences
Interest rates

Question 7

Personal attitudes: Risk adverse

Answer 7

Cautious and want to save money to ensure security in the future.

Question 8

Personal attitudes: Risk taker

Answer 8

Willing to take risks e.g. to gamble or spend all their money

Question 9

Common principles to be considered in planning personal finance

Answer 9

To avoid debt
Control costs
Avoid legal action
Remain solvent
Good credit rating
Avoid bankruptcy
Generate income and savings
Set financial targets/goals
Provide insurance against loss or illness
counter effects of inflation