2.8 Role of money and financial markets

• What is the definition of money?

  Anything generally accepted as payment
• What are the functions of money?

  Store of value, standard of deferred payment, measure of value
• What does 'store of value' mean?

  Money holds its value for future purchases
• How does money act as a measure of value?

  It measures the value of goods and services
• What is a currency?

  The system of money used in a country
• What counts as money in the UK?

  Cash and bank deposits
• What is a debit card?

  Linked to personal savings, no overdraft
• What is a credit card?

  Pre-agreed credit limit for over 18s
• What does the financial sector consist of?

  Financial organizations and their products
• What are the functions of the financial sector?

  Facilitates saving and lends money
• What are the five ways people can borrow from a bank?

  • Personal loans
  • Mortgages
  • Credit cards
  • Pay-day loans
  • Overdrafts
• What is the role of the Bank of England?

  Keeps prices stable and regulates markets
• What do commercial banks do?

  Take deposits and turn them into assets
• What is investment banking?

  Organizes large financial transactions
• What are insurance companies?

  Institutions that provide compensation for risks
• What types of life insurance are there?

  • Whole of life insurance
  • Term life insurance
• What is the importance of the financial sector?

  Provides credit, manages risk, and liquidity
• What are interest rates?

  Percentage charged for borrowing money
• What happens to saving behavior during a recession?

  People may save more if jobs are at risk
• How do fixed incomes affect saving behavior?

  Retired people may need to save more
• What are alternative savings options?

  Stocks, shares, ISAs, premium bonds