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Learning Centre
IGCSE ECONOMICS 0455
CHAPTER 6: Money
Prepared by: Rell Thon (012-288 1843)
18-1, Jalan C180/1, Dataran C180, Cheras 43200 SelangorIGCSE E
INOMICS 0455 HAPTER
6.1 Money
What is money?
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Why do we need money?
1, We need money in order to exchange goods and services with one another.
2. We can't produce all our wants by ourselves. Thus, there is a need for exchange.
Characteristics of money
[Ducal lt,
Bank notes and coins are ind
Money is widely recognised an s a medium of exchange
Money is easy to en terms of its value
Money, is virtually identical in terms of shape, size and design
Money is in order to keep its value, the supply of
money can only be done bythe ¢entralbank
____| Money is conveniently portable,
The functions of money
[Moola +f Money is widely recognised and acceptable as a medium of
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loney acts as a unit of account, allowing us to compare and state
Pasar if vue. the worth of different goods and services
It holds its value for a long time, allowing us to save it for future
purpose:
tort of-Voht, \purposes
of dutensh | Deferred payments are purchases on credit - where the consumer
__| can pay later for the goods or service, they buy
Banking
Banks are financial institutions that act as an intermediary between borrowers and savers.
It is the money we save at banks that is lent out as loans to other individuals and businesses.
Commercial banks
- Banks that have many retail branches located in most cities and towns.
- Example: HSBC, Maybank, Public bank
Rell Thon(012-288 1843) Page 1|2IGCSE ECONOMICS 0455, CHAPTER 6
Functions of a commercial bank
. Accept deposits in the form of savings.
. Aid customers in making and receiving payments via their bank accounts.
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2.
3. _Trovidy _ lox to businesses and private individuals.
4, ide (pSvrore (protection in the form of money against
damage/theft of personal property).
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Central banks
- Monetary authority that oversees and manages the nation's money supply and banking
system
- Example: Bank Negara Malaysia (BNM) ——> po [avotnn) Ride
Functions of a central bank: 40U,n
«It 1$swes hale adte God, Cains of the national currency.
. It_manaygs a relating to the government.
It manage§ national debt. Central banks can issue and rca publie debts ‘on the
government's behalf
it SURKS Gaol Cental all the other banks in the whole economy,
even tine their deposits and transferring funds between them.
Itis the lender of last resort’ to'commercial banks. When other banks are having financial
aifcutes, the centr banka lend them money to prevent them from going bankrupt.
6. Ite Cot olan \ese reserves are used to
make international paymgits and adjust their currency value (adjust the exchange rate).
in an economy.
Rows
Stock exchanges
Stock exchange is an institutional marketplace for trading the shares of public limited
companies. It provides a platform for individuals, organizations and governments to
buy and sell shares
- Example: Kuala Lumpur Stock Exchange (KLSE), Stock Exchange of Hong Kong (SEHK)
Functions of stock exchanges:
CIPO)
Raising shore cupite ‘or businesses by allowing initial public offering activities
scil-fiag Com pyry gm’th by allowing existing company to sell additional shares
fasc ills #4 Y of government bonds
n for trading shares
Regulating the trading of shares and ensure safety of transactions
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