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Money and banking (Characteristics of money (Durability - money such as …
Money and banking
Characteristics of money
Durability - money such as bank notes and coins, should be fairly long lasting yet easily replaced if it becomes worn
Acceptability - money is widely recognised and accepted. as a medium of payment for goods and services
Divisibility - as money is measure of the value of goods and services, it must be divisible. Many economists and historians believe that cattle are the oldest form of money, with the cows being used for trade as far back as 9000 BC
Uniformity - for money to be easily recognisable there must be uniformity. This means that all $50 banknotes will look identical in terms of shape, size, and design
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Forms of money
Cash - banknotes and coins are a physical form of money.
While cash is convenient for many transactions
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Central bank reserves - these consist of the money
held by central bank and used by commercial banks to make payment between themselves.
Function of money
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Measure of value ( unit for account ) - it measures the market value of different goods and services.
Store of value - it can be stored and used at some time in the future. In the other words, money must be able to holds it purchasing power over time.
Central bank
the central bank of country is the monetary authority that oversees and manages them economy's money supply and banking system
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definition
Is any commodity that can be used as a medium of exchange for the purchase of goods and services, e.g. banknotes and coins
Bartering - is the act of swapping items in exchange for other items through a process of bargaining and negotiation, due to the absence of money in the economy