Banking Instruments and Payment Methods

12 Questions

What is one of the characteristics of money?

Divisibility

The barter system is a modern method of trading.

False

What is one of the functions of money?

medium of exchange

Money is a _______ for deferred payments.

standard

Match the following sources of capital with their descriptions:

Business Loans = Borrowing money from a lender for business purposes Savings = Using one's own money to finance a business Crowdfunding = Raising money from a large number of people, typically through the internet Grants = Receiving money from a government or organization for a specific purpose

What is a disadvantage of the barter system?

Lack of double coincidence of wants

What is a bank draft?

A payment that is like a check, but its amount is guaranteed by the issuing bank

A consumer is always someone who purchases a good or service.

False

What is entrepreneurship?

The ability and readiness to develop, organize and run a business enterprise, along with any of its uncertainties in order to make a profit.

A _______ is a written instruction to a bank to transfer a certain sum to the account of the payee.

cheque

Match the following terms with their definitions:

Goods = Finished products that are sold to consumers Commodity = Raw materials that are traded on exchanges Customer = An organization or individual who purchases a product or service to resell, gift, or use it Consumer = A person who ultimately consumes a good or service

What is e-commerce?

Trading of goods and services using online communications

Study Notes

Instruments of Exchange

Bank draft: a payment guaranteed by the issuing bank, drawn from the payer's account, and similar to a check.
Cheque: written instructions to a bank to transfer a certain sum to the payee's account.
Banknotes: cash.

Electronic Transfers

Electronic transfer: any transfer of funds made electronically.
Mobile Money: the use of cell phones to transfer money electronically.
Money Transfer: the action of moving money from one account to another digitally.

E-commerce and Profit

E-commerce: trading of goods and services using online communications.
Profit: financial gain obtained by spending less than what was earned.

Market and Goods

Market: any situation or place where buyers and sellers meet.
Goods: finished products sold to consumers.
Commodity: raw materials traded on exchanges.

Consumer vs. Customer

Customer: an organization or individual who purchases a product or service to resell, gift, or use it.
Customer: someone who purchases a good or service to fulfill their needs.
Consumer: anyone who uses a product or service, but they don't always pay for it.
Consumer: a person who ultimately consumes a good or service.

Entrepreneurship

Entrepreneurship: the ability and readiness to develop, organize, and run a business enterprise, along with its uncertainties, to make a profit.

Characteristics of Money

Acceptability
Scarcity
Durability
Divisibility
Recognizability

Functions of Money

Medium of exchange: money is accepted as payment for goods and services.
Store of value: money can be saved and will keep its value.
Standard for measuring values: money helps in determining the value of goods and services.
Standard for deferred payments: money allows for borrowing and credit payments.
Transfers value: value can be transferred from one person to another.

Barter System

Facilitates trade without money.
Enables the disposal of surplus production.
Increases the availability of goods.
Laid the foundation for the organized method of trading.

Disadvantages of Barter System

Lack of double coincidence of wants.
Lack of common measure of value.
Difficulty in deferring payments.
Indivisibility of goods.
No storage of value.

Sourcing Capital

Business Loans
Savings
Crowdfunding
Grants and Competitions