Money and Banking

The use of a mobile (cell) phone to make payments is an example of which function of

money?

• a medium of exchange

• a standard of deferred payment

• a store of wealth

• a unit of account

A function of money is to act as a measure of value.

What does this mean?

• It is used to compare the worth of different goods.

• It is used to enable monthly payments for expensive goods.

• It is used to pay the price of a good.

• It is used for future savings.

What is the usual reason why citizens trust their country’s banknotes?

• They are acceptable for trade and exchange.

• They are backed by gold at the central bank.

• They are convertible into the US$ or Chinese Yuan.

• They are recognisable and in infinite supply.

What function does a central bank fulfil?

• It prints and issues currency.

• It offers overdraft facilities to individuals.

• It operates deposit accounts.

• It raises taxation.

Which statement about a country’s banks is correct?

• Commercial banks hold the financial accounts of the government.

• Commercial banks offer loans to consumers and firms.

• The central bank sets the government’s tax and spending policies.

• The central bank supplies foreign currency to members of the public.