Money and Banks

Functions of money

-Medium of exchange

-Store of value (wealth)

-Unit of account → we can price everything in terms of one thing (e.g HKD)

-Standard of deferred payment

Properties of money

-Portable

-Hard to forge/copy

-Divisible → can divide into small bits

-Scarce but not too scarce

-Intrinsic value → Useful in themselves

Being self-sufficient

To produce everything you need or want yourself

Problems with the barter system

-Fixing the exchange rate → How many pencils are worth an apple

-Finding someone to swap with

-Trying to save → Cheese and meat goes bad, so how do you save it for future exchange

What makes good money?

-Acceptability

-Divisibility

-Durability

-Scarcity

-Portability

Functions of a commercial bank

-Accepting money of consumers for saving

-To make and receive payments

-Giving loans

-Providing insurance

-Providing exchange of currencies

-Providing cheque services

-Providing credit and debit cards and internet banking

Secondary functions

-Collecting and clearing cheques on behalf of their clients

-Offering financial services such as tax advice

-Providing safety deposit boxes for customers

-Providing money transfer facilities

-Providing credit card facilities

-Providing internet banking facilities