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Economics IGCSEPDF 54
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■ Without the use of money.
The direct exchange of goods/services for other goods/services. [1]
■ Requires a double coincidence of wants.
(Choose any two)
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Must be widely accepted by people as payment for goods
and services. Without this, it cannot function as a medium of exchange.
■
Must be strong enough to be used many times without
deteriorating. Coins and polymer notes are very durable.
■
Must be easy to carry around. Modern money (notes, coins,
digital) is very portable compared to bartering with, for example, livestock.
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Can be broken down into smaller units of value to pay for
items of different prices.
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Profit is mainly from the interest rate spread.
They take deposits from savers and pay them a certain rate of
interest.
■ They then lend this money out to borrowers (e.g., mortgages, business
loans) at a higher rate of interest.
The difference (spread) between the lending rate and the saving rate is
their gross profit.
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■ Other Sources: They also earn revenue from fees and commissions on
services like international money transfers, financial advice, and account
administration.
(A good answer requires looking at both sides before concluding).
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Manages the entire country's monetary policy,
controlling inflation and influencing unemployment/growth. This impacts
everyone.
Systemic Stability:
■
Acts as the 'lender of last resort', preventing the
collapse of commercial banks which could trigger a financial crisis.
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Manages the government's finances and the
national debt, which is crucial for the running of the country.
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It is the sole issuer of legal tender, which is the
foundation of the entire monetary system.
■
They are the main point of contact for
individuals and firms for day-to-day financial transactions (deposits,
payments, credit).
(a) Definition of Barter
○ Note:
[1]
(b) CharacteristicsofMoney
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Note:
Acceptability:
Durability:
Portability:
Divisibility:
(c) Analysis ofCommercialBankProfits
○ Note:
Primary Source:
Process:
Government Banker:
Issues Currency:
Arguments that Commercial Banks are more important:
Direct Public Interaction:
(d) DiscussionoftheImportanceofCentralvs.CommercialBanks
○ Note:
○ ArgumentsthataCentralBankismoreimportant:
Macroeconomic Stability: