Money 3.1.1

Money

Generally acceptable as a means of payment

Forms of Money

Coins

Banknotes

Bank account

Functions of money

Medium of Exchange

Store of Value

Unit of Account

Standard of deferred payment

Medium of Exchange explained

Allows people to buy and sell product

Store of Value

Saved until it is spent, doesn’t deteriorate with time, holds purchasing power over time

Unit of account explained

Unit of account measuring market value of different goods and services

Standard of deferred payment

Allows people to buy and lend

Characteristics of money

Acceptable

Durable

Divisible

Portable

Recognizable

Homogenous

Acceptable money explained

Widely accepted as a medium of payment for goods and services

Durable money explained

Long lasting and easily replaced

Divisible money explained

Possible to divide into smaller values to make small purchases or to give change without losing value

Portable money explained

Can be carried around easily

Recognizable money

People can easily see the item is money

Homogenous money explained

Every note or value of the same value should be exactly the same