Characteristics of Money and Inflation

These flashcards cover essential vocabulary related to the characteristics of money, inflation, and various payment methods based on the lecture notes.

Properties of Money

Money must be scarce, durable, and transferable.

Scarcity

A characteristic of money that means it is limited in supply.

Durability

A feature of money that indicates it can withstand physical wear and tear.

Transferability

The ability to easily exchange money for goods and services.

Inflation

An economic condition where the overall price level rises, decreasing money's purchasing power.

Purchasing Power

The amount of goods and services that can be bought with a unit of currency.

Central Bank

The institution responsible for managing a state's currency, money supply, and interest rates.

Currency

A system of money in general use in a particular country.

Bartering

A system of exchange where goods and services are exchanged directly without money.

Examples of Payment Methods

Forms of payment include cash, debit cards, credit cards, and mobile payment apps.

National Bank

The central bank of a country responsible for monetary policy and financial stability.

Exchange Rate

The value of one currency compared to another currency.

Cash vs. Book Money

Cash is physical money, while book money refers to funds held in bank accounts.

Effects of Inflation

Inflation leads to a decrease in purchasing power, meaning less can be bought with the same amount of money.

Advantages of Using Money

Money simplifies trade, serves as a store of value, and facilitates economic transactions.

Disadvantages of Bartering

Bartering can be inefficient, requiring a double coincidence of wants, limiting trade.