Question

1. List and explain the functions of money.

2. List and explain the components of the money supply.

3. Describe through the use of T accounts the birth & growth of the Wahoo Bank.

4. List and explain the reserve requirements for banks in 2014 for checking accounts and savings accounts.

Answer 1

1. Functions of Money

• Medium of Exchange : Money is a medium of exchange for the transaction of various commodities in the market. In the absence of money, it would be a barter transaction.
• Store of Value : Money acts as a store of value as the commodities can be purchased at any point of time using money. It can be stored and can be utilised for purchasing any point of time.
• Unit of Account : Money acts as a unit of account provided a common measure of the value of goods and services being exchanged. Knowing the value of the price of goods and services, the supplier can figure out how much to produce and the buyer can decided how much to buy.