Money and its functions

Text 14.

Retell the text.

Put special questions to the text.

Make up sentences with the following word combinations.

Give the Definitions.

Complete the sentences.

1) Working capital is for….2) Finance for working capital can be obtained from… 3) It is possible to convert fixed capital into….4)Many companies, especially new ones, raise capital, both ….

Working capital, fixed capital.

Finance companies, some funds, different payments, working capital.

The main feature of money is its acceptance as the means of payment or medium of exchange. Nevertheless, money has other functions. It is a standard of value, a unit of account, a store of value and a standard of deferred payment.

Money, the medium of exchange, is used in one – half of almost all exchange. Workers work for money. People buy and sell goods in exchange for money. We accept money not to consume it directly but because it can subsequently be used to buy things we wish to consume. Money is the medium through which people exchange goods and services.

In barter economy there is no medium of exchange. Goods are traded directly or swapped for other goods. In a barter economy, the seller and the buyer each must want something the other has to offer. Each person is simultaneously a seller and a buyer. There is a double coincidence of wants.

Trading is very expensive in a barter economy. People must spend a lot of time and effort finding others with whom they can make mutually satisfactory swaps. Since time and effort are scarce resources, a barter economy is wastefill.

Money is generally accepted in payment for goods, services, and debts and makes the trading process simpler and more efficient.

Money can also serve as a standard of value. Society considers it convenient to use a monetary unit to determine relative costs of different goods and services. In this function money appears as the unit of accounts, is the unit in which prices are quoted and accounts are kept.

To be accepted in exchange, money has to be a store of value. Money is a store of value because it can be used to make purchases in the future.

Houses, stamp collections, and interest – bearing bank accounts all serve as stores of value. Since money pays no interest and its real purchasing power is eroded by inflation, there are almost certainly better ways to store value.

Finally, money serves as a standard of deferred payment or a unit of account over time. When you borrow, the amount to be repaid next year is measured in money value.

Дата добавления: 2014-10-22