Unit 4. The functions of money 


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Unit 4. The functions of money



 

E. валютный рынок, рынок крат­косрочных операций

F. почтовый денежный перевод

G. денежно-кредитная политика

H.копилка

!. легкие деньги, деньги при из быточном предложении кредита J. ссудный процент К. горячие деньги, большие массы краткосрочных капиталов L. денежная единица М. дорогие деньги, деньги с высокой стоимостью займов N. наличные деньги О. валютное соглашение Р. деньги, которые могут быть выплачены сразу

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Money serves as a medium of exchange, a unit of account, and a store of value. We would like to examine each of these functions, beginning with medium of exchange.

A medium of exchange, or a transactions medium, is anything generally acceptable as a means of payment in the exchange of goods and services, in repaying debts, and in the exchange of assets, such as shares of common stock.

The second function of money is to serve as a unit of account. A unit of account is a yardstick for measuring prices and values and a benchmark for comparing them. In principle, any commodity can serve as a unit of account. Having chosen the good, we can express the price of each of the rest of the goods in units of that good. Historically, societies designated a single item to serve as the unit of account, say, a kilogram of wheat. In this way, each good could be priced at so many kilograms of wheat per unit, in modern times, paper money is the unit of account. For example, the dollar is the unit of account in the United States. Knowing that a pound of peaches costs two dollars and a pound of apples costs one dollar enables us to compare their value. Thus, money becomes a standard of value.

Normally, the same item serves as the unit of account and the medium of exchange: the dollar in the United States; the yen in Japan; the mark in Germany. In abnormal times, however, societies divorce the two functions

of money, often unofficially. For example, although the ruble is the unit of account in Russia, some Russians use foreign currencies, such as the dollar and the mark, as the unofficial medium of exchange. Many Russians, without access to foreign currencies, resort to barter. Invariably, the reason forthe divorce of the medium of exchange from the unit of account is a deterioration of the currency as a store of value, which takes us to the third function of money.

Astore of value is a reservoir of future purchasing power. Money is both a temporary and a permanent store of purchasing power. The function of money as a temporary store of purchasing power is an outgrowth of its function as a medium of exchange. If an item is to serve as a medium of exchange people must hold that item to carry out their transactions. For example, consider an individual who earns $700 a week but plans to spend $560 on goods and sen/ices and save $140 every week. Usually this individual will not spend the entire $560 on payday. Instead, he may spend $90 on payday and hold $470 in the form of money to be spent over the course of the week. This $470 held in money is a temporary store of purchasing power.

People, however, hold more money than they need to carry out their transactions. Why? The answer is that money can also serve as a permanent store of purchasing power. Individuals who save forgo present consumption to have higher future consumption. The wealth of individuals is their accumulated savings. Money is one form in which individuals may keep their wealth; stocks, bonds, and real estate are other forms. Of course, when wealth is held in money, in the future it will not need to be exchanged to buy goods and services. The ability of money to serve as a store of value depends on its capacity to retain its purchasing power.

EXERCISES

Exercise 1. Illustrate your understanding of three functions of money with your own examples.

Exercise 2. Write down the questions for these answers.

1. Money can serve as a medium of exchange, a unit of account, and a store of value.

2. One of the functions of money is to serve as a unit of account.

3. A yardstick is a unit of account for measuring prices and values.

4. A benchmark is a unit of account used for comparing prices and values.

5. The dollar is the unit of account in the United States.

6. Money is a standard of value.

7. Usually the same item serves as the unit of account and the medium of exchange in one country.

8. Russians use foreign currencies, such as the dollar and the Euro, as the unofficial medium of exchange.

9. Money is both a temporary and a permanent store of purchasing power.

10. People hold more money1 than they need to carry out their transactions because that money can also serve as a permanent store of purchasing power.

11. The wealth of individuals is their accumulated savings.

12. An individual may keep theirwealth in stocks, bonds, and real estate.

13. When wealth is held in money, in the future you won't have to exchange it to buy goods and services.

Exercise 3. Make sentences with the following word - combinations,

1. spend money
2. make! earn money make money (make a profit)
3. get / earn good money (be paid good wages)
4. lose money (not make a profit, so that a business owes more than
it earns)
5. cost money / cost a lot of money
6. save money
7. lend / borrow/owe money
8. waste money (on something)
9. be a waste of money
10. charge (somebody) money
11. raise money
12. pay money (for something)
13. give somebody their money back / refund somebody's money
14. a sum/an amount of money

Exercise 4. Insert the correct word from the line.

Computer programmer, money, earn, purse, will cost, back, spend, help, is losing, cash, borrow, coins, charge.

1. Money is what you... by working and can use to buy things.

2. Money can be in the form of notes and... or cheques, and can be kept in a bank.

3. Don't... all your money on the first day of your holiday!

4. She doesn't earn very much....

5. The company... money and may have to close down.

6. The repairs... quite a lot of money.

7. I don't want to... money from the bank unless I really have to.

8. They... huge amounts of money for their services.

9. We're trying to raise money to... children with cancer.

10. If you are not completely satisfied with our products, we will give you your money....

11. You can earn good money as a....

12. Money in the form of coins or notes that you can carry around with you is called....

13. You'll find some money in my....

Exercise 5. Correct the sentences.

1. I didn't have some money on me (I was not carrying any money).

2. Don't forget to get some Swiss money before you leaves.

3. The family made their moneys in the woolen trade.

4. It sound quite an interesting job, but I don't know what the money's like yet.

5. You have to work long hours and the money are terrible!

6. He working for a finance company now. and making loads of money.

7. At last the business are starting to make money.

8. We don't going on holiday this year because we're trying to save money.

9. Could you lend me a money?

10. He were left a large sum of money.

11. We can changes some money at the airport (change it into the money of another country).

Exercise 6. Match the idioms and their explanations.

1. pay good money for something

2. put/pump/pour money into something

3. there's money (to be made) in something BBBF

4. I'm not made of money

5. have money to burn

6. get your money's worth

7. be in the money

8. money is no object

9. for my money

10. put (your) money on something

11. I'd put (my) money on something

12. my money's on somebody / something also the smart money's on somebody / something

13. money for old rope

14. put your money where your mouth is

15. money talks

16. be (right) on the money

17. marry (into) money

A. to give money to a company or business so that it will become successful and you will earn money from it in the future

B. to show by your actions that you really believe what you say (informal).

C. used to say that someone can spend as much money as they want to on something (informal).

D. to marry someone whose family is rich.

E. to spend a lot of money on something (spoken).

F. to have a lot of money suddenly, or when you did not expect to (informal).

G. money that you earn very easily by doing a job that is not difficult (British English spoken).

H. used to say that you cannot afford something when someone asks you to pay for it (spoken).

I. used to say that people with money have power and can get what they want (spoken).

J. to have more money than you need, so that you spend it on unnecessary things.

K. to be completely correct or right (American English spoken).

L. used when giving your opinion about something to emphasize that you believe it strongly (spoken).

M. used to say that you feel sure that something will happen (spoken)

N. used to say that you can earn a lot of money from doing a particular job or type of business (spoken).

0. to risk money on the result of a race or competition.

P. to get something worth the price that you paid.

Q. used to say that you feel sure someone will win a race or competition, or that something will happen (spoken).

Exercise 7. Translate the following sentences into Russian.

1. Don't let the children jump around on the sofa, (paid good money for that

2. No one's going to put money into the company while the market is so unstable.

3 There's a lot of money in sport these days.

4. Teaching can be very rewarding, but there's no money in it.

5. Unless you've got money to burn, these expensive guitars are probably not for you.

6. At that price, you want to make sure you get your money's worth.

7. For my money, he's one of the best TV comedians ever.

8. You were right on the money when you said that he would have to resign

 



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