Fabiano Johannes.

Microeconomics

1. Explain in your own words what is meant by money?

- money can be de ned as anything that people use to buy goods and services. Money is
what many people receive for selling their own things or services. Money is also called many
other names, like currency or cash. Money is something that can provide for our needs and
wants as well.

2. Enumerate and explain in your own words the various forms of money. Cite

one (1) example for each form.

- Fiat Money - a currency established as money, often by government regulation. Examples:

Banknotes (paper money) and coins.

- Commodity Money- is money whose value comes from a commodity of which it is made.
Examples : precious metals, salt, beads and alcohol.

- Representative Money- is any medium of exchange, often printed on paper, that

represents something of value, but has little or no value of its own.. Examples :
certi cates, paper money and token coins

- duciary money- refers to banknotes and coins in circulation in the economy. Examples:
checks and bank drafts

- commercial bank money - describes the portion of a currency which is made of book
money – debt generated by commercial banks. Examples : mortgages, auto loans and
personal loans.

3. Enumerate and explain in your own words the key functions of money. Cite one

(1) example for each function.

- store of value - A store of value is essentially an asset, commodity, or currency that can be
saved, retrieved, and exchanged in the future without deteriorating in value. Example: gold
and other precious metals

- Unit of account - can be used to value goods and services, record debts, and make
calculations. example :housing prices in Japan

- Medium of exchange - is an intermediary instrument or system used to facilitate the sale,

purchase, or trade of goods between parties. Example : stones, salt , gold and tobacco

4. Enumerate and explain in your own word the main characteristics of money.

durability - An item must be able to withstand being used repeatedly

portability - Must be able to go wherever such that it is easy to transport as people travel

divisibility - money can be divided into small increments that can be used in exchange for
goods of varying values.

uniformity - Bills or coins of equal denomination are all alike, or nearly alike.

limited supply - In order to maintain its value, money must have a limited supply.

acceptability - most business and individuals will accept money in exchange for goods and
services.

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