topic 1 - purposes of money (1)
- Created by: Hetal M
- Created on: 04-10-17 15:26
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- Topic 1 - Purposes of money
- money = anything that is accepted to make payment
- barter to trade goods
- "double coincidence of wants"
- 2 parties agreeing a rate of exchange
- "double coincidence of wants"
- using items with intrinsic value as payment
- using items instead of money = sell off any extra goods they produce
- impractical drawbacks = some items wont last for long - e.g. crops and cattle
- value of an item can vary - e.g. gold
- using items that represent value as money
- development of money = items with intrinsic value made into items that represented value
- intrinsic value items made into notes and coins
- using paper notes = exchange for an item and get back a receipt
- intrinsic value items made into notes and coins
- development of money = items with intrinsic value made into items that represented value
- modern payments
- coins, notes, cards, cheques
- local exchange trading system = system of credits without the need for cash
- barter to trade goods
- features of money
- acceptable = trust that the money will be accepted everywhere
- UK notes = "i promise to pay the bearer on demand the sum of..."
- money = fiduciary value (faithful)
- recognisable = need to notice if its real or not
- security features are added (holograms, watermark, metallic threading)
- stable = needs to hold value
- be the same value in the future
- inflation = same amount buys less in the future
- divisible = variety of denominations
- large amounts = pay with notes and receive change
- bank payments = specific
- durable = strong enough to be used repeatedly
- portable = easy to carry (large amounts = notes, small = coins)
- scarce but sufficient = having the right amount in circulation
- too much money = inflation rises = value falls
- homogenous = looks and feels the same
- designs may vary - new design = early release = become familiar with it
- acceptable = trust that the money will be accepted everywhere
- money = anything that is accepted to make payment
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