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Topic 1 Purposes of money - Coggle Diagram
Topic 1 Purposes of money
What is Money??
Money is a currency used to purchase goods and services.
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Money is anything that is widely accepted as a means of payment.
The Development of money.
Intrinsic value: the value of an item has its own intrinsic value. The limitations of barter caused people to decide what goods they had and its intrinsic value.
Payments used: Rice, cattle or grain, gold.
Before money was created, people used the barter system to trade goods/services.
bartering: is a method used to exchange goods and services without using money.
Coincidence of wants: When to people provide goods/services to trade and both trades can provide it.
LETS: local network, enables people to exchange good and services without using money.
Modern payments
Most payments are now Banknotes or electronic transferring
China developed the idea to create banknotes, around the 7th century.
Features of Money
Recognisable: Money should be easily identified
Stable: Money needs to hold its value over time.
Acceptable: key features of money should be widely excepted
Divisible: should be easily divided into different values.
Durable: Money should be strong enough to be reused.
Portable: money should be small and light enough to be carried around.
Homogenous: all coins/notes of the same denominator should look and feel the same.
Functions money must perform
Means of exchange: Function of money used to make payments
Store of value: Allows people to store money and use later
Unit of account: Function of money used to compare prices
A means of borrowing
People can borrow to buy goods and services if they cannot afford it from the current income.
Borrowing allows people to borrow money from a bank to be payed over a period of time.
Borrowing is delayed payments