MONEY SYSTEMS AROUND THE WORLD. Question…. What is money?. Money and Currency Systems. Money is anything people will accept for the exchange of goods and services. Question…. What characteristics does all money have? (5). 5 main characteristics of $.
What is money?
What characteristics does all money have? (5)
1. Acceptable - people must be willing to accept it for what they are selling.
2. Scarcity - if the item being used as money is plentiful, it will not retain its value. As items used for money become common, they lose their buying power.
- Gold and silver are commonly used as money because they are durable (first made into coins in the seventh century B.C.).
without killing it.
How does money cause problems for international business transactions?
Answer: Companies want to be paid in the currency of their home country.
The exchange rate is the amount of currency of one country that must be traded for one unit of the currency of another country.
Question: Why do inflation and interest rates affect foreign exchange?
- If money is available, but no one is borrowing, interest rates decline.
c) Inflation- as prices rise, the buying power of money declines, so lenders charge a higher interest rate.
- Lenders need to collect more money for a loan when inflation is present so they can cover the lost buying power of the currency they receive in later payments from the borrowers.