ECS UPDATED NOTES
This document has a summary of notes that will help you to prepare for your upcoming 2021 October - November exam. Refer also to your trusted text books. Use previous exam papers, assignments memorandums, as well as group discussion.
Best of luck.
1. Medium of exchange
2. Unit of account
3. Store of value
Money: anything that is generally accepted as payment for goods and services or that is accepted in settlement of
debt.
Properties of money:
1. Uniformity
2. Durability
3. Divisibility
4. The ability to be carried
Functions of the SARB:
1. Formulation and implementation of monetary policy
2. Service to the government
3. Provision of economic and statistical services
4. Maintaining financial stability
Demand for money: the amount that the various participants in the economy plan to hold in the form of money
balances.
Motives for holding money:
1. Transactions motive: as a medium of exchange – to enter into transactions between paydays.
2. Speculative motive: money as a store of value – there is an inverse relationship between the quantity of
money demanded for speculative purposes and the level of the interest rate.
Monetary policy: the measures taken by the monetary authorities to influence the quantity of money or the rate of
interest with a view to achieving stable prices, full employment and economic growth.
Repo: the sale of an existing security (financial assets) at an agreed price, coupled with an agreement by the seller to
purchase (buy back) the same security on a specified future date (normally seven days later) at the same price. The
maturity value of the repo is determined in the initial agreement and consists of the price plus an agreed amount of
interest. The interest represents the cost of obtaining funds for a week and is known as the repo rate.
Repo rate: The rate at which the SARB grants accommodation to the banks is called the repo rate.
Income: the amount of funds, goods or services received by an individual, corporation or economy in a given time
period.
Wealth: assets that have been accumulated over time. Wealth can take many forms such as fixed property, shares,
oriental carpets or paintings. It can also take the form of money. Money is used as a unit of account to measure
wealth. It is possible to be very wealthy without having money.
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