Summary A Level Economics - Introduction to Money

Microeconomics AS




Money
Barter and its advantages
- required double coincidence of wants
- difficult to compare the value of different goods and services
- products might be indivisible (animals)
- products may be difficult to store while seller is looking for a buyer

Cash and bank deposits, cheques, near money and liquidity
- bank deposits: money held in accounts with a financial institution
- cash: notes and coins, most liquid form of asset
- near money: quasi money, not a medium of exchange, an asset that can be converted into
money quickly
- cheque: a means of payment, not a form of money

Functions of money
- a medium of exchange
- a measure of value or unit of account: allows goods of different values to be compared
- a standard for deferred payment: borrowing money (encourages the provision of credit
and so acts as an incentive to trade)
- a store of value or wealth: money does not physically deteriorate and is inexpensive to
store, however, money faces deterioration of value due to inflation (purchasing power)

Characteristics of money
- acceptability
- divisibility: can be divided into smaller units (RM to sen)
- portability: so that it can be carried around
- durability: physically durable, although new ones need to be printed later
- scarcity: this factor makes it worthy
- stability of supply: over a long period of time
- recognisability: confidence
- uniformity: coins or notes used have exactly the same value
- stability of value: over a period of time, inflation




Notes by Xuan