Econ ch 15 ,16,17 ,19,21

Cards (134)

  • Bartering
    The act of swapping items in exchange for other items through the process of bargaining and negotiation
  • Problems with bartering
    • Double coincidence of want
    • Indivisible
    • Non-portable
    • Difficulty in storing value
  • Honey
    Anything generally accepted as payment for goods and services and repayment of debts
  • Commodity money
    Money made from commodities like cowry shells, grain, gold and salt
  • Representative money
    Coins, paper money, and different forms of certificates, gold and silver
  • Types of representative money
    • Flat money (coins, banknotes, bank accounts)
    • Deposit money (bank deposits)
  • Cash
    Physical form of money (banknotes and coins)
  • Bank deposits
    Allow consumers to electronically transfer money easily from one bank account to another
  • Central bank
    Consists of the money held by the central bank and used by commercial banks to make payments between themselves
  • Functions of money
    • Medium of exchange
    • Measure of value
    • Means of deferred payments
    • Store of value
  • Characteristics of money
    • Uniformity
    • Durability
    • Portability
    • Divisibility
    • Scarcity
  • Money market
    A market where money is traded, including honey, bullion, and other markets where the product is money
  • Commercial bank
    A retail bank that provides financial services to businesses and individuals, responsible for managing the deposits of account holders
  • Factors affecting interest rates charged by commercial banks
    • Time of loan
    • Type of loan
    • Type of customer
  • Interest rate
    The rate at which commercial banks attract customers by giving them interest on their money
  • Revenue for commercial banks
    Interest rate on loans, charging fees for offering financial services, managing investments
  • Functions of commercial banks
    • Accepts deposits
    • Cleans cheques
    • Provides safety deposit boxes
    • Provides money transfer facilities
    • Offers internet banking
  • Fractional reserve banking
    When banks keep 10% of deposits as reserves and lend out the remaining 90%
  • Central bank
    The monetary authority that oversees the economy's money supply and banking system, owned by the government
  • Functions of central bank
    • Sole issuer of banknotes and coins
    • The government's bank
    • The bankers' bank
    • Lender of last resort
  • Ways people get money
    • Providing services as labour in order to earn wages
    • Investing in savings and earning interest on their money
  • Reasons people earn money
    • Buy goods and services
    • Save it
  • Disposable income
    The income remaining after income tax has been deducted
  • Disposable income decreases
    Spending decreases
  • Interest rate increases
    Saving, borrowing and spending decreases
  • Consumer confidence is low (during a recession)
    Saving increases, spending decreases
  • Consumer confidence is high (during an economic boom)

    Saving and spending increases
  • Inflation decreases the purchasing power of money
  • Inflation increases
    Spending, saving and borrowing increases
  • Age
    The younger you are, the more you are willing to spend. The older you are, the more you are willing to save.
  • Saving
    Occurs when people put away a part of their income for future spending
  • Reasons for saving
    • To earn interest from the bank
    • For precautionary reasons (to afford medical expenses)
  • Disposable income increases
    Saving increases
  • Interest rate increases
    Saving increases
  • Income level increases
    Saving increases
  • Borrowing
    Occurs when an individual or organisation takes out a loan from a bank or financial institution and pays it back over time with interest
  • Reasons for borrowing
    • Fund education
    • Purchase a property
    • Start a business
  • Interest rate increases
    Borrowing decreases
  • Consumer confidence increases
    Borrowing increases
  • Availability of funds increases
    Borrowing increases