Passage 1: The Role of Money
Money is an essential part of our daily lives and plays a vital role in the economy. It is used as a medium of exchange, which means that people use money to buy goods and services. Before money was invented, people relied on bartering, which involved trading items directly. However, bartering had its limitations, as it required a double coincidence of wants—both parties had to want what the other offered. Money solves this problem by providing a common medium that everyone accepts. Additionally, money serves as a unit of account, helping us measure the value of different items, and as a store of value, allowing us to save for future purchases.
Questions and Answers:
Question 1: What is the primary role of money in the economy?
Answer: The primary role of money is to serve as a medium of exchange for buying goods and services.
Question 2: What was the system used before money was invented?
Answer: Before money was invented, people relied on bartering.
Question 3: What problem does money solve that bartering does not?
Answer: Money solves the problem of needing a double coincidence of wants, as it provides a common medium that everyone accepts.
Question 4: Besides being a medium of exchange, what is another function of money?
Answer: Another function of money is serving as a unit of account, helping measure the value of different items.
Question 5: How does money act as a store of value?
Answer: Money acts as a store of value by allowing us to save for future purchases.
Passage 2: Understanding Credit
Credit is another important concept in the world of finance. It allows individuals and businesses to borrow money to make purchases or investments. When someone uses credit, they are essentially receiving a loan that they agree to pay back later, usually with interest. This can be useful for buying big-ticket items, like a car or a house, which many people cannot afford to pay for all at once. However, it is essential to use credit wisely. Mismanaging credit can lead to debt, making it difficult to repay loans. Responsible use of credit helps build a good credit history, which can be beneficial for future borrowing.
Questions and Answers:
Question 1: What is credit?
Answer: Credit is the ability to borrow money to make purchases or investments.
Question 2: What does using credit involve?
Answer: Using credit involves receiving a loan that must be paid back later, usually with interest.
Question 3: Why is credit useful for buying big-ticket items?
Answer: Credit is useful because it allows people to buy items they cannot afford to pay for all at once, like a car or a house.
Question 4: What can happen if credit is mismanaged?
Answer: Mismanaging credit can lead to debt, making it difficult to repay loans.
Question 5: How does responsible use of credit benefit individuals?
Answer: Responsible use of credit helps build a good credit history, which can be beneficial for future borrowing.
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