Money

Definitions

1

Banks which aim to make a Profit

Commercial Bank

2

An item which is generally acceptable as a means of payment

Money

3

A Government owned bank providing services to the Government

Central Bank

4

Term for being able to turn an asset into cash quickly without a loss

Liquidity

Functions of Money

1

Money allows to buy & sell products

Medium of Exchange

2

Money allows people to borrow and lend

Standard of Deferred Payment

3

Prices are expressed in monetary terms

Unit of Account

4

Money does not deteriorate with time and hence will be acceptable in future

Store of Value

Characteristics of Money

1

Money must be something which has a relatively stable value over time

Stability

2

Money must be something that can measure all the goods and services accurately

Divisibility

3

 Money must be something that everyone can accept as a medium of exchange.

Acceptability

4

Money must be something that people can easily carry with them from one place to another.

Portability

Characteristics of Money

1

People can accept something as money only if it has value.

Scarcity

2

Money should not be something that gets damaged easily or spoiled in a short period of time

Durability

3

Every note or coin must be of the same value and should be exactly the same

Homogenous

4

People can easily see that item is money

Recognisable