Unit 3 - Learning aim A Flashcards
What are the 4 functions of money?
- Unit of account
- Means of exchange
- Store of value
- Legal tender
What is unit of account?
It allows us to place a monetary value on goods and services.
What is means of exchange?
It allows us to trade.
What is store of value?
It allows us to use it in the future as it keeps its value.
What is legal tender?
It is a legally recognized form of payment.
What is the role of money factors?
- Personal attitudes
- Life stages
- Culture
- Life events
- External influences
- Interest rates
Explain personal attitudes?
Individuals have different attitudes to risk and reward. Some individuals save money and avoid credit others will have little or no savings and buy numerous items on credit.
Explain life stages?
Individuals financial needs change as they move different stages of their life. Middle Aged individuals may need to obtain finance to move home whereas during old age individuals may downsize their properties to a smaller house and pass on funds to children or grandchildren.
Explain culture?
Different cultures and religious beliefs can influence individuals attitude to money e.g. The Chinese used to have a culture of saving but this has changed recently with younger generations buying shares and purchasing items on credit.
Explain life events?
Key events in an individual’s life can change their view of money e.g. saving for a wedding or changing financial plans after starting a family.
Explain external influences?
The Economy can impact on an individual’s view of money. During a recession jobs are difficult to find and this can make individuals cautious whereas during periods of growth individuals can be more willing to take on debt.
Explain interest rates?
The interest rates set by the Bank of England can have an impact on individuals’ attitude to money. If interest rates are high, individuals are more likely to save and less likely to buy items on credit. If interest rates are low the opposite is true.
Definition of debt?
Money owed
Definition of credit rating?
A score given to individuals on how likely they are to repay debts based upon their previous actions.
Definition of interest rate?
The cost of borrowing money or the reward for saving money.
