Group Member: Ching Wen, Pei Ni, Jia Qi, Si Qing

Tutorial Chapter 6
1. List the forms of money.
The forms of money are notes, debit/credit card, coins and cheque.
2. Explain five (5) characteristics of money.
There have 5 characteristics of money which are homogeneous, recognizable, portable,
durable and divisible. Homogeneous is same quality and quantity. The unit of the money
must be of the respects otherwise there will be confusion in buying and selling of goods and
services. On the other hand, the colour and size of money material help the people to deal in
the market. On top of that, recognizable is recognized either by sight or touch. The printing of
notes is secret. It is difficult to forge because the process of colouring and the quality of paper
are always in the hands of central bank. Besides, the general public is familiar with the
various kinds of notes. Other than that, for portability is allows to be easily carried around,
thus allowing bigger volumes of transactions to be carried around. Apart from that, for
durability is money must be able to shored from a substantial period without suffering any
physical deterioration and allows for accumulation of wealth. Besides, for divisibility is to
overcomes the problem of barter trade which requires “double coincidence of wants”.
3. Explain the FOUR (4) function of money in an economy.
There is 4 function of money in an economy. The first function is medium of exchange. It
enables people to sell products and then use the money received to buy other products, thus
making the exchange of products easier. Its characteristic of being acceptable, people have
confidence and are willing to accept it in exchange for goods & services.
Next, another function of money is unit of account. Unit of account refer to the use of
money to put a value on good and services. Prices are quoted in terms of common monetary
units. Apart from that, another function is store of wealth. Store of wealth allows for business
transactions and allows for accumulation of wealth. Store of wealth is to enable people to
save. Money can be held or ‘stored’ for a period before it is used.
Lastly, the function of money is standard for deferred payment. Standard for deferred
payment allows for installment payments and purchases in advance of payments to be carried
out. Since money act as unit of account, payment can be made in the future once terms have
been agreed between the parties involved.
4. Sketch the diagram in money market equilibrium when
i. Sudden increase in cost raw materials for business
r
MS
D1

D2
 Qm

ii. Government decrease money supply

r MS 1 MS 0

MD

Qm

iii. Central bank buy back government securities from commercial bank
r
MS 0 MS 1

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Qm

iv. Rise in price level

r MS

D2

D1

Qm
v. Central bank increase the reserve ratio of commercial bank
r
MS 0
1 MS 0

MD

Qm