Summary
Specialisation involves focusing on a limited range of goods or services to increase productivity, while financial markets and money facilitate trade and economic growth.
- Specialisation — the production of a limited range of goods by an individual, firm, or country. Example: A country focusing on producing electronics while importing food.
- Division of Labour — when an employee focuses on performing a specific task. Example: An assembly line worker installing car doors.
- Medium of Exchange — money used to enable the purchase and sale of goods and services. Example: Using cash to buy groceries.
- Measure of Value — money used to give the value of a good or service. Example: Pricing a book at $10.
- Store of Value — money allowing people to save and spend in the future. Example: Saving money in a bank account.
- Method of Deferred Payment — money linking different time periods for borrowing and saving. Example: Taking a loan to buy a car and repaying it over time.
- Financial Market — a set of arrangements where monetary assets are traded. Example: Stock exchanges where shares are bought and sold.
Exam Tips
Key Definitions to Remember
- Specialisation
- Division of Labour
- Medium of Exchange
- Measure of Value
- Store of Value
- Method of Deferred Payment
- Financial Market
Common Confusions
- Confusing the roles of money with its forms
- Misunderstanding the difference between product and financial markets
Typical Exam Questions
- What is specialisation? Specialisation is focusing on a limited range of goods or services to increase productivity.
- How does money function as a medium of exchange? Money facilitates the buying and selling of goods and services.
- What role do financial markets play in the economy? They facilitate saving, borrowing, and the exchange of goods and services.
What Examiners Usually Test
- Understanding of the functions of money
- The benefits and drawbacks of specialisation
- The roles and significance of financial markets