Week 1 : Purpose Of Money Flashcards
Barter
To exchange goods and services for other goods and services without using money
Current account
Bank or building society accounts where people store their money in the form of electronic balances and withdraw it to make payments
Denomination
A group of coins or notes that share the same face value
Divisible
A key feature of money - to be easily divided into amounts of different value
Double coincidence of wants
A situation in which 2 people have goods or services to trade and each wants what the other person can provide
Durable
A key feature of money- to be strong enough to be reused in many transactions
Face value
The value marked on a coin or note (eg, 1p, 5p, £20)
Fiduciary value
Value based on trust in the banking system
Homogeneous
A key feature of money - to look and feel the same as other coins and notes of the same denomination
Inflation
A rise in prices, which means that the purchasing power falls
Intrinsic value
The value that an item has itself eg, a bag of rice has intrinsic value because it is a staple food. A solid gold coin has intrinsic value because it is made of a precious metal. A bank note does not have intrinsic value because it is a piece of paper
Legal tender
Coins or banknotes that must be accepted if offered in payment of a debt
Means of exchange
A function of money - to allow people to make payments
Money
Anything widely accepted as a means of making payments
Payment mechanism
A means of transferring money from 1 account to another eg, a debit card, cheque
Portable
A key feature of money - to be small and light enough to carry around easily
Purchasing power
The quantity of goods or services that money can buy
Rate of exchange
How much 1 item is worth in terms of a different item eg, 1 bag of flour is worth 4 nails, 1 British pound is worth 1.5 euros
Recognisable
A key feature of money - to be easily identified as genuine money
Representational value
The value that an item represents rather than the value it has in itself: a banknote is just a price of paper but it represents the value that is printed on it
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
Store of value
An attribute of new that allows people to store money now and spend it later
Transaction
Buying or selling something
Unit of account
Function of money - to allow people to compare prices and to measure the value of money in a bank account
