Barter and Money

Barter

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

Money

• Any item or verifiable record (cheques, credit transfers, or credit cards) is generally accepted as payment for goods and services and repayment of debts in a particular country.

Acceptability

• It's an important characteristic of money, money should be accepted as a means of payment for goods, services, and debt repayment.

Durability

• It's an important characteristic of money; items used should retain the same shape over a long period.

Divisibility

• It's an important characteristic of money, they can be divided into small amounts to facilitate transactions of varying values.

Portability

• It's an important characteristic of money: money can be easily moved from one location to another.

Stability

• It's an important characteristic of money: money must keep its value on a day-to-day basis, with no extreme fall in purchasing power during a short period.

Scarcity (Non-counterfeit)

• It's an important characteristic of money, they should be limited in supply and cannot be easily duplicated.

Medium of Exchange

• It's an important function of money, accepted in exchange for all goods and services in a country.

A measure of value (unit of account / standard of measurement)

• Important function of money, acts as a common measure of value of products.

Store of Value

• Important function of money, people can use money for saving.

Standard for Deferred Payment (Future Payment)

• Important function of money, people and firms can use it as a basis for credit transactions (buy now and pay later).

Legal Tender

• A debtor can legally compel their creditor to accept banknotes and coins as payment.

The Purchasing Power of Money (The Value of Money)

• Amount of goods and services a given sum of money can buy
• Inflation reduces purchasing power, as you can purchase fewer quantities of a certain product.

Supply of Money

• Total financial assets/money in circulation in an economy at a certain point in time.

Money Market

• A network of banks and other financial organizations deals with short-term loans.

Building Societies

• Specialized banks offer loans for purchasing and improving houses and premises.

Hot Money

• Amount of money invested in a 24-hour money market; amount of money allocated to buy shares and securities to resell them during 24 hours.

Current Bank Account (Demand Account)

• Bank account opened by an individual or firm for immediate access to their money
• Banks usually do not pay interest for these accounts.

Deposit Bank Account

• Bank account opened by an individual or firm as a means of saving money, without immediate access to the money
• Banks usually pay interest for deposit accounts.

Narrow Money (M1)

• Consists of coins, notes, and bank current accounts.

Broad Money (M4)

• Consists of coins, notes, bank current accounts (either at home or abroad), deposits (either at home or abroad), hot money, accounts in building societies, and accounts in post offices.

Central Bank

• The monetary authority of a country, with the monopoly to print and distribute money, supervise commercial banks, and determine monetary policy (interest rates, money supply, and exchange rates).

Commercial Banks

• Provide financial products to individuals and firms
• Examples: current and deposit bank accounts, currency exchange, loans, and transmission services
• Tend to be large-size public limited companies.

Bank Overdraft

• When a bank allows a business to withdraw more money than its account balance.

Transmission Services

• Function of commercial banks, allows individuals and businesses to receive money from others and/or make payments to others.

Stock Exchange Market

• A place where shares, debentures, and other financial assets are traded.

Share

• A certificate representing a part of the capital of a limited company that allows a shareholder to receive dividends.

Dividends

• Distributed profits to shareholders as a reward for their investment in a company.

Ordinary Shares

• Shares receive variable dividends and have a voting/management right.

Preference Shares

• Shares receive fixed dividends and have NO voting right.