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Lesson Flashcards: Money Economics

Functions of money

Unit of account, store of value, medium of exchange, and general purchasing power

Indivisibility

The concept that certain goods, such as livestock, cannot be divided into smaller portions to establish a barter with goods of smaller value

Paper money

Promissory notes written on paper containing agreements on the transfer of ownership of coins

Digital money

Software-based electronic money that is not physically stored in the consumer’s location

Money

Anything that is generally accepted as payment for goods and services by the different participants in the economy

Types of e-payment cards

Debit, credit, ATM, and store-value cards

Electronic money

Monetary value that is stored electronically and widely usable by people as a means of payment (also referred to as e-money)

Debit cards

Cards that enable payments to be directly withdrawn from the customer’s bank account at the time of the transaction

Commodity money

Any type of money with intrinsic value used as a medium of exchange or a unit of account

ATM cards

Cards that allow consumers to access their bank accounts to convert their credit money to banknotes using automated teller machines (ATMs)

Bartering

A process through which two parties agree to directly exchange one good or service for another

Store of value

The function of money that allows the owner to defer the usage of money’s general purchasing power

Stored-value cards

Cards that are preloaded with monetary value that can be used to pay for transactions

Double coincidence of wants

The requirement that the two bartering parties should have simultaneous needs for each other’s goods or services

Barter

A system of trading that involves parties directly exchanging one good or service for another (for example, a carpenter and a fisherman exchanging a table for some fish)

Credit money

The monetary value created through debts and obligations

Hardware-based electronic money

E-money whose value is stored in physical devices carried by the consumers (e.g., smart cards)

Coins

Metallic tokens, usually made of gold or silver, that overcome a disadvantage of commodity money by being easily divisible

Legal tender

Money backed by the legal authority of the issuing government

Credit cards

Cards issued by banks or nonbanking financial institutions that enable cardholders to borrow monetary value from the issuers

Fiat money

Paper money not supported by physical assets but approved by the government as legal tender

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