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Questions and Answers
Which of the following are functions of money? (Select all that apply)
Which of the following are functions of money? (Select all that apply)
- Medium of exchange (correct)
- Store of value (correct)
- Standard of value (unit of account) (correct)
- None of the above
Which of the following are characteristics of money? (Select all that apply)
Which of the following are characteristics of money? (Select all that apply)
- Durability (correct)
- Portability (correct)
- Divisibility (correct)
- All of the above (correct)
What is durability?
What is durability?
When money lasts for a while.
What is portability?
What is portability?
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What is divisibility?
What is divisibility?
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What is uniformity?
What is uniformity?
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What is limited supply?
What is limited supply?
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What is acceptability?
What is acceptability?
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What are the types of money? (Select all that apply)
What are the types of money? (Select all that apply)
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What is fiat money?
What is fiat money?
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What is commodity money?
What is commodity money?
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What is representative money?
What is representative money?
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What is default?
What is default?
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Study Notes
Functions of Money
- Serves as a medium of exchange, facilitating trade and transactions.
- Acts as a store of value, preserving purchasing power over time.
- Provides a standard of value (unit of account), allowing for the comparison of different goods and services.
Characteristics of Money
- Durability: Money must withstand physical wear and tear to retain its functionality.
- Portability: Money should be easy to carry and transport, enhancing its usability in transactions.
- Divisibility: Money can be divided into smaller units without losing its value, accommodating various transaction sizes.
- Uniformity: Ensures standardization in form, which means each unit is identical in value and appearance.
- Limited Supply: A controlled quantity of money in circulation prevents inflation and maintains value; involves recycling of currency.
- Acceptability: Money must be widely accepted and trusted by users as a valid medium for transactions.
Types of Money
- Fiat Money: Has value assigned by government decree rather than intrinsic worth; its legitimacy comes from legal status.
- Commodity Money: Physical items with inherent value (such as gold or silver) that are used as a medium of exchange.
- Representative Money: Represents a claim on a commodity; for instance, receipts that confer ownership of a specific amount of a commodity.
Additional Term
- Default: The failure to repay a loan, which can have serious financial consequences for the borrower.
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