5. Money
How does bank money differ from commodity and fiat money? in 2 ways: it is nonphysical and there is some element of risk that the claim will not be fulfilled if the financial institution becomes insolvent.
How does money function? as measure of value, a store of value, a medium of exchange, a standard of deferred payment.
How does money perform a function of a Measure of value? Money is used as a common denominator of value for pricing goods and services.
What characteristics does money have? Following characteristics of money are: stability, portability, durability, uniformity, divisibility and recognizability.
What does durability mean as a characteristic of money? Modern money is made of a very high quality material that makes it possible to be in circulation over a long period of time.
What does legal tender mean? It means that it must be accepted in settlement of debts.
What does money mean as a Store of value? Money enables people to use the value of something that they sell today to take a purchase sometime in future.
What does the purchasing power of money mean? Purchasing power means the amount of goods and services people can buy with their money.
What does uniformity denote? Equal denominations of money should have the same value.
What is bank money? is checks, drafts and bank credits other than currency that are the equivalent of money.
What is currency? Currency is a common form of legal tender in many countries and refers to all coins (hard money) and paper money (soft money) issued by the central bank of a nation and held by the public within a country.
What is money as a Medium of exchange? Money enables exchanges to be made easily.
What is money? Money is anything that is generally accepted in payment for goods and services, and debts and makes the trading process simpler and more efficient.
What is portability of money? Modern money has to be small enough and light enough for people to carry.
What is recognizability as a quality of money? Money should be easily recognized for what it is and hard to copy.
What is stability of money? The value of money should be more or less the same today as tomorrow.
What is the difference between commodity money and fiat money? Commodity money is a good whose value serves as the value of money, and fiat money is a good, the value of which is less then the value it represents as money.
What is the difference between inflation and deflation? An extended period of rising prices is called inflation while a period in which prices are falling is called deflation.
What money are people most familiar with? Nowadays the money people are most familiar with is currency.
What served as money at different periods of time and in different parts of the world? At different periods of time money served as: cattle, sheep, furs, leather, fish, tobacco, tea, salt, etc.
What types of money do economists differentiate nowadays? Commodity money, fiat money, and bank money.
Why do people store money or spend it immediately? People store money in the hope its value will increase, or spend it immediately thinking it'll be worth less tomorrow.
Why does performing a function of a standard of deferred payment differ from other function of money? because it isn't functioning as an immediate medium of exchange or store of value, but, rather, as a medium by which future payments will be made.
Why is divisibility of money considered as one of its principal advantages? It's easy to make change for a large denomination.
Why is modern money in circulation over a long period of time? because it is made of very high quality material.
Why is money as a Medium of exchange considered the most important and the most easily understood function of money? because money enables exchanges to be made easily, so people can sell what they have produced and have available to anyone and use the money to buy what they want.
Why the different commodities that served as money replaced by precious metals? because the economists consider that to serve effectively as money, a commodity should be rather durable, easily divisible and portable.