Understanding Money

What is money in the narrow sense?

• Physical currency like coins and banknotes

• Stocks

• Cryptocurrency

• Credit cards

Explain the nature of money.

• Money serves as a widely accepted medium of exchange, unit of account, and store of value.

• Money is only valuable if made of gold

• Money has no impact on the economy

• Money is primarily used for decoration purposes

What are the functions of money?

• Medium of exchange, unit of account, store of value, standard of deferred payment

• Means of transportation, Source of entertainment, Form of communication

How does money facilitate trade?

• Money increases the cost of goods and services.

• Money complicates transactions by introducing bartering systems.

• Money simplifies transactions by providing a universally accepted form of payment.

• Money is only accepted in certain regions.

Discuss the characteristics of money.

• Flexibility

• Durability, Portability, Divisibility, Uniformity, Limited Supply, Acceptability

• Transparency

• Durability

• Indestructibility

Explain the concept of divisibility in relation to money.

• Divisibility means combining money with other currencies

• Divisibility is the process of converting money into physical coins

• Divisibility in relation to money refers to the ability to evenly divide a certain amount of money by another amount without any remainder.

• Divisibility refers to the ability to multiply money by a certain factor

What is the role of money as a unit of account?

• Money as a unit of account determines the physical weight of goods and services.

• Money as a unit of account is used to control inflation rates.

• Money as a unit of account is only applicable in online transactions.

• Money as a unit of account helps in measuring and comparing the value of goods and services.

Describe the function of money as a store of value.

• Money as a store of value by increasing in worth over time

• Money as a store of value by being easily counterfeited

• Money as a store of value by fluctuating in value unpredictably

• Money functions as a store of value by maintaining its worth over time, enabling individuals to preserve wealth and purchasing power.

How does money act as a medium of exchange?

• Money is only used for saving purposes

• Money has no impact on the economy

• Money facilitates the buying and selling of goods and services by providing a common measure of value that is widely accepted.

• Money is only accepted in certain countries

Discuss the importance of money in the modern economy.

• Money is essential in the modern economy for facilitating transactions, enabling specialization and trade, and promoting economic growth.

• Bartering is a more efficient system than using money

• Money is irrelevant in the modern economy

• Money leads to economic instability