Cours 6

American businesses produce, market, and distribute goods and services. Money makes it possible for businesses to obtain what they need from suppliers and for consumers to obtain goods. Money is defined as anything customarily used as a medium of exchange, a unit of accounting, and a store of value. The basis of the market economy is voluntary exchange. In the American economy, the exchange usually involves money in return for a good or service.

The Functions of Money

Most Americans think of money as bills, coins, and checks. Historically, and in other economies, money might be shells, gold, or even goods such as sheep. Economists identify money by the presence or absence of certain functions. Anything that is used as a medium of exchange, a unit of accounting, and a store of value is considered money. For example, Native Americans used wampum - beads made from shells. Fijians have used whales’ teeth. There are three functions of money.

1- Medium of Exchange

To say that money is a medium of exchange simply means that a seller will accept it in exchange for a good or service. Most people are paid for their work in money, which they then can use to buy whatever they need or want. Without money people would have to barter - exchange goods and service for other goods and services. Suppose you worked in a grocery store and were paid in groceries because money did not exist. To get whatever you needed, such as clothes and housing, you would have to find people who have the goods that you want. In addition, those people would have to want the exact goods - in this case, groceries - that you have. Barter requires what economists call a double coincidence of wants. Each party to a transaction must want exactly what the other person has to offer. This situation is rare. As a result, people in societies that barter for goods spend great amounts of time and effort making trades with one another. Bartering can work only in small societies with fairly simple economic systems.

2- Unit of Accounting

Money is the yardstick that allows people to compare the values of goods and services in relation to one another. Money that is a measure of value functions in this way as a unit of accounting. Each nation uses a basic unit to measure the value of goods, as it uses the foot or meter to measure distance. In the United States, this base unit of value is the dollar. In Japan, it is the yen; in France, the franc. An item for sale is marked with a price that indicates its value in terms of that unit. Using money as the single unit of accounting provides a simple and convenient way to compare the values of various items. By using money prices as a factor in comparing goods, people can determine whether one item is a better bargain than another. A single unit of accounting also allows people to keep accurate financial records - records of debts owed, income saved, and so on. Businesspeople can better calculate their profits and losses over the years by using a single money unit of accounting.

3- Store of Value

Money also serves as a store of value. You can sell something, such as your labor, and store the purchasing power that results from the sale in the form of money for later use. People usually receive their money income once a week, once every two weeks, or once a month. However, they usually spend their income at different times during a pay period. To be able to buy things between paydays, a person can store some of his or her income in cash and some in a checking account. It is important to note that in periods of rapid and unpredictable inflation, money is less able to act as a store of value.

Quiz 1: Ways of approving

•       Q1 I'm quite happy to support you in your ....... for a loan.

(a) subscription (b) indication (c) application (d) abdication

•       Q2 I must admit I think your idea is well ....... considering.

(a) valuable (b) worthy (c) value (d) worth

•       Q3 I shall certainly recommend your ....... for improving safety in the work place.

(a) proposal (b) preference (c) preferment (d) proponent

•       Q4 You can ....... on me for support when the next election comes up.

(a) number (b) count (c) account (d) detail

•       Q5 I would ....... like to endorse your scheme for saving water.

(a)full heartedly (b)open heartedly (c)wholeheartedly (d)complete heartedly

•       Q6 The local council has approved the plans for ....... their house.

(a) developing (b) lengthening (c) widening (d) extending

•       Q7 You can ....... on me to support you when the matter is discussed at the next meeting.

(a) rely (b) trust (c) believe (d) follow

•       Q8 His choice of a new wife ....... with his parents' approval.

(a) struck (b) met (c) hit (d) fell

•       Q9 They all promised they would stand ....... him when he put forward the idea of a strike.

(a) on (b) to (c) by (d) through

•       Q10 The meeting unanimously supported the chairman when he suggested that they ....... the meeting.

(a) shut (b) finalise (c) stop (d) close

Quiz 2: Money Matters (1)

•       Q1 Even after their recent heavy expenses, they still found there was a healthy ....... in their bank account.

(a) rest (b) remainder (c) balance (d) basis

•       Q2 As the builder wanted cash for the work he had done, she had to go to the bank personally to ....... the money herself.

(a) take off (b) take out (c) take over (d) take in

•       Q3 It was considered a very good time to apply for a ....... to buy the house because interest rates were very low.

(a) pledge (b) promise (c) mortgage (d) borrowing

•       Q4 Before they could borrow a large sum of money to buy the house, they had to make sure they had enough money to be able to make a ....... payment.

(a) down (b) through (c) low (d) base

•       Q5 All the ....... you make on your internet account are recorded so that you can check the details at any time.

(a) movements (b) deals (c) activities (d) transactions

•       Q6 I'm afraid this cheque will be of no value until you have put your ....... on it.

(a) signature (b) signs (c) signing (d) signed

•       Q7 The bank refused to ....... the money order because the customer had no proof of identity.

(a) receive (b) take (c) accept (d) enter

•       Q8 Under the rules laid down by the bank there is a ....... on the amount of money you can get out from a cash machine in any one day.

(a) limiting (b) restriction (c) restricting (d) limitation

•       Q9 The bank clerk at the counter did not know the customer and in view of the large amount of money involved was naturally ....... about paying out the sum on the cheque.

(a) concerned (b) careful (c) conscious (d) cautious

•       Q10 The bank will simply not let you ....... any money unless you can prove that you have been in regular employment for at least three years.

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Quiz 2: