Unit 3 - A1 - Ms Powell

Question 1

What are the 4 functions of money?

Answer 1

• Unit of account
• Means of exchange
• Store of value
• Legal tender

Question 2

What is unit of account?

Answer 2

The function of money that enables the user to keep accounts, value transactions, etc

Question 3

What is means of exchange?

Answer 3

A medium of exchange.

Question 4

What is store of value?

Answer 4

A store of value is the function of an asset that can be saved, retrieved and exchanged at a later time. The most common store of value in modern times has been money, currency, or a commodity like a precious metal or financial capital.

Question 5

What is legal tender?

Answer 5

Legal tender is any official medium of payment recognised by law that can be used to extinguish a public or private debt, or meet a financial obligation.

Question 6

How is the role of money affected and influenced?

Answer 6

• Personal attitudes towards risks and reward, borrowing, spending and saving.
• Life stages (childhood, adolescence, young adult, middle age, old age)
• Culture, including religious and ethical beliefs.
• Life events can vary the personal life cycle from individual to individual.
• External influences/trends and the financial-related effects.
• Interest rates, cost of borrowing versus rewards of saving.

Question 7

What is expenditure?

Answer 7

The total amount of money that a government or person spends.

Question 8

Planning expenditure, what are the common principles to be considered in planning personal finance?

Answer 8

• To avoid getting into debt
• To control costs
• Avoid legal action and/or repossession
• Remain solvent
• Maintain a good credit rating
• Avoid bankruptcy
• To manage money to fund purchases
• Generate income and savings
• Set financial targets and goals
• Provide insurance against loss or illness
• Counter the effects of inflation.