Summary Chapter 3

Summary Economy chapter 3

Bartertrade ►trade goods for goods ( no money )
►money in the form of silver or gold doesn’t have the limitations
Like barter trade, but there is not enough silver or gold to make all the trading
Activity possible. That is why we use banknotes or money. But you cannot
Simply print as much Euro’s as you want, because every euro represents a
Small part of the production value of the “Euro-countries”
Money ► a medium of exchange
► anything that is acceptable to buy things with
► has three jobs
• it’s a medium of exchange ( it’s an acceptable payment. )
• it’s a store of value ( when you sell something, the money you get will
keep it’s value.
• it’s a measure of value ( it’s used to price goods. )
► needs to have four characteristics
• limited supply ( there must be a limited supply of the money, if it was
not, it would not have any value. )
• divisibility ( you have to be able to divide it, so into small portions )
• portability ( you should be able to carry it around )
• durability ( it has to last )
► coins
• Precious metals like gold and silver were accepted by most people in
exchange for goods and services. They were a earlier form of the
money we have now.
• there was argued about the weight and quality of gold, silver and
metal, so people stamped the information on them.
► banknotes
• People started to store coins with goldsmiths and they gave them an
IOU. Or a promise to pay. But the IOU’s themselves became the
money. Banks replaces goldsmiths as the place where people would
store their money. Since the Euro, the Netherlands central bank is bank
in charge of issuing Euro-banknotes. A promise to pay is called am IOU
because it stands for I owe u. that sounds as IOU.
► bank deposits
• the most important form of money in many countries are bank
deposits. This money consists of bookkeeping entries in a bank’s
account. You cannot see or touch it.
• they are money because they are acceptable in trade for goods.
Currency ► the amount of money circulating in the economy.
Legal tender ► forms of money that must always be accepted by law.

Before there was money, people got goods through barter. Then people started to do one job, so people could go to other people for other things they needed. This is called division of labour. Money appeared. In theory anything can act as money. For example shells, beads, ivory and salt. Money is very important in economy. Without money, we would have to produce all are goods ourselves. So we would have less goods. The most important types of money used are coins, notes and bank deposits.

If you buy something, you usually pay in cash. If you can’t or don’t want to, you can buy on credit or on account. That means that you get what you want to buy right now and you pay later. This way of paying has become more popular. You can do that later in one time, or in instalments. That means that you pay more times and interest charges and administrative costs are included. Mail order companies usually give costumers the possibility to buy on account. This way of buying is more expensive, because the company needs to make money out of it. You have to take a few things in consideration :
* you have to make sure that the repayment period is shorter than the life-span of the
* compare interest rates the companies charge. They can vary a lot.
* Make sure you will be able to afford the weekly or monthly payment.

There are a lot of ways you can pay money to someone else.

1. ‘geldopnameformulieren’
These are used for cash withdrawals. You can take money from your bank account with them. If you take more money than is on your account, you will have a dept and have to pay interest. These are getting less popular.

2. ‘overschrijvingsformulieren’
These you can use to put money from your own bank account to the bank account of someone else. They are sometimes called ‘bankgiroformulier’ or ‘girokaart’. Many companies give a acceptgirokaart, and you have to pay with that card. It’s usually filled in entirely, you only have to sign it and sometimes put the amount of money in. You can also do this online.

3. ‘automatic Giro’
When there goes money from your bank account to another without you having to remember to do it. It goes automatically. There are to ways to use it
► standing orders : this way is used to make regular payments for a fixed sum of
Money. You give the bank all the information and they do it for you.
► direct debit : this is a lot like standing orders, but it’s used for paying bills which
Are usually a different amount of money each time. You fill in a form and if you
don’t want the amount of money to be taken, you have to say it on time.

4. credit cards
It’s a piece of plastic that allows you to buy goods and services by borrowing it from a credit card company. The three most well known used in the Netherlands are American Express, Eurocard and Visa. Some shops offer their own credit card, only to be used in that shop. There is given a limit. You cannot spend more than that.

5. switch-cards
These are special cards used to withdraw money from a machine. You can also pay with them in some shops. You have to type in a code. The money is directly withdrawn from your bank account.

6. ‘Chipping’
With a ‘chipper’ or ‘chipknip’ you can withdraw some money from your account. The amount is written on your card with a chip. It’s not necessary to open a telephone line every time you pay now. The machine in the shop withdraws money from your card and puts it on the shopkeepers’ account.
7. Pc, internet, WAP phone banking
You can pay online now, also on your mobile phone.

Foreign currency.

Every company has it’s own currency. The Americans have the dollar, the Japanese have the Yen and other countries have other currencies. These are foreign currencies. As from 1 January 2002, Europe’s currency is the Euro. If you go to a country which is not using the Euro, you have to switch the Euros into the other currency. You will always have to pay more at the selling rate than at the buying rate. The difference is the profit for the bank. You will also have to pay the bank a fee.

Exchange rate ► selling rate : The price you pay for obtaining foreign currency.
► buying rate : The price you get for selling foreign currency to a bank

12 countries are using the Euro right now. : Germany, France, Italy, Spain, The Netherlands, Belgium, Austria, Finland, Portugal, Ireland, Luxembourg and Greece. The U.K., Denmark and Sweden will maybe join later. On 1 January 1999, the Euro was officially started. The exchange rate had been fixed on 31 December 1998. The first years, the Euro only was used in Bank deposits. As from 1 January, the Euro was considered legal tender.

© Eva de Schipper, B2a

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