In modern economies money has replaced barter - Leaving Cert Economics - Question 4 - 2017
Question 4
In modern economies money has replaced barter.
(i) Explain the terms money and barter.
(ii) Explain one difficulty associated with the use of barter.
(iii) State ... show full transcript
Worked Solution & Example Answer:In modern economies money has replaced barter - Leaving Cert Economics - Question 4 - 2017
Step 1
Explain the terms money and barter.
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Answer
Barter is the system of exchanging goods and services directly without using money; it involves swapping one item for another. Money, on the other hand, is any item that is widely accepted as payment for goods and services or to settle debts.
Step 2
Explain one difficulty associated with the use of barter.
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One major difficulty with barter is that it can be time-consuming to find a person who has the item you want and who also wants the item you have. This is often referred to as the 'double coincidence of wants', making transactions complicated.
Step 3
State two other items which are currently used as money, other than coins and notes.
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Cheques
Debit Cards
Step 4
Explain each of the underlined terms.
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Answer
Interest rate refers to the cost of borrowing money or the return on savings, expressed as a percentage. Savings is defined as a portion of an individual's income that is not spent and is set aside for future use.
Step 5
State and explain two factors, other than interest rate, which households may consider in deciding whether to save or not.
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Answer
Income levels: The greater a person's income level, the higher their ability to save, as they may have more disposable income available.
Level of Inflation: Inflation can reduce the real rate of return from savings; when prices rise, the purchasing power of saved money diminishes.
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