Chapter 1. Money And Banking

Gold is considered an example of commodity money because it has intrinsic value. It is a physical item that holds value and can be used as a medium of exchange. Unlike paper money or cheques, which derive their value from the trust and confidence placed in the issuing authority, gold has value in and of itself. It has been used as a form of currency throughout history and is still recognized as a valuable asset today. Therefore, gold is an example of commodity money.

To get a credit card, you have to be at least 18 years old. This is because the legal age of adulthood in most countries is 18, and individuals are considered mature enough to handle financial responsibilities such as managing a credit card. At this age, individuals are also more likely to have a stable source of income, which is an important factor for credit card approval.

Electronic funds transfer refers to the process of making and receiving payments through electronic means, such as computers and other automated systems. This involves the transfer of funds electronically, without the need for physical checks or cash. The other options, such as the transfer of funds from the Federal Reserve to member banks or the amount of demand deposits held at banks, do not accurately describe electronic funds transfer. Therefore, the correct answer is C. making and receiving payments via computers and other automated means.

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The endorser of a check is the person who makes payment on the check. This means that they are the one who writes their name on the back of the check, indicating that they are transferring the payment to someone else. The person who originally wrote the check is the drawer, not the endorser. The person who printed the check is not relevant to the endorsement process.

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The basic functions of money include being a store of value, a standard of deferred payments, and a method of saving. However, money itself is not a means of calculating real value. The value of goods and services is determined by various factors such as supply and demand, production costs, and market conditions. Money is simply used as a medium of exchange to facilitate transactions and represent the value of goods and services.

BACS stands for Bankers Automated Clearing System. This system is used by banks in the United Kingdom for processing electronic payments such as direct debits and direct credits. The BACS system allows for the efficient and secure transfer of funds between different bank accounts, making it a vital part of the banking infrastructure in the UK.

Nominal prices refer to the prices of goods and services in terms of money. Money acts as a medium of exchange when it is used to facilitate transactions by enabling the exchange of goods and services for a certain amount of money. Nominal prices directly involve the use of money as a medium of exchange, making it the best example among the given options. Exchange rates, interest rates, and real prices are not directly related to the use of money as a medium of exchange.

Many employees receive their salaries directly into their accounts by BACS payment.

Token money refers to a form of currency that holds value primarily because it is made from a material that has intrinsic worth. In other words, the value of token money is roughly equivalent to the value of the material it is made from, such as metal or paper. This distinguishes it from other forms of money, where the value may be based on factors such as government backing or the trust and confidence of users. The correct answer, option C, accurately describes this characteristic of token money.

Money of redemption refers to the standard money used in the monetary system. It is the basic money of a country, into which other forms of money may be converted and which determines the value of other kinds of money. It is the currency that is widely accepted in payment for goods and services.

Traveller's checks are considered as a form of money because they can be replaced if stolen or lost. This feature provides a sense of security and convenience to the users as they can easily recover their funds in case of any unfortunate incident.

Modern monetary standards have been either commodity standards, in which either gold or silver has been chiefly used as commodity money, or fiat standards, consisting of inconvertible currency paper units.