1. Cigarettes were used as money in the war. t
2. Trading is expensive in a barter economy.
3. Money in current accounts in banks is legal tender.
4. If the goldsmiths insisted that all transactions were backed by equal amounts of gold in the vaults, then their actions could not cause growth in the money supply.
5. Banks are the only financial intermediaries.
6. The clearing system represents one way in which society reduces the costs of making transactions.
7. The more liquid an asset, the higher the return received.
8. The monetary base is the quantity of notes and coins in circulation with the non-bank private sector.
9. The more cash that the public wishes to hold, the higher is the money supply.
10. Building society deposits are so liquid that they ought to be included in the definition of money.
X. Complete the sentences with prepositions:
1) Hongkong Banks net interest income increased a).. 19 % last year.
2) Chrysler might run b) . money to pay interest c) . its bonds.
3) Your accountant will make d) .. your accounts and prepare your tax return.
4) Total public spending will rise e) .. real terms f) .. 4 % this financial year and will
continue g) .. this pace in the year to spring 2010.
5) Interest h) .. the instruments i) .. the interest rate basket is usually received more
frequent by than annually and most often j) .. intervals of three months.
6) Construction lending has been badly hit by restrictions k) .. loans.
7) Where can I exchange my dollars l) .. pounds?
8) Investors have doubled their money after swapping the bonds m) a package of cash and shares.
9) Some states allow card payments n) certain taxes.
10) Basically, commercial banks the ones that people use to keep their savings o) and to borrow their money p) the countrys central bank.
XI. Read the text and choose the correct word or words from A, B, C or D to fill in each gap:
Money: its functions and characteristics
Money is something that ___1___ all of us take for granted in so far as we need it to carry out our daily lives. Riding on a bus, purchasing a soft drink or an ice-cream are simple yet very frequent examples of when we hand ___2___ a few coins or a note to whoever ___3___ these things for us. The process is so simple in fact that we have no need to even think about it. Having said that, all of us (except possibly for Bill Gates of Microsoft) would like more money, but is a different ___4___ as we saw earlier.
The money we pay for purchases is usually our national currency, such as dollars, euros, rubles, rupees and so on. The coins and paper notes themselves have little or no intrinsic value their value to us stems directly from the fact that sellers have complete ___5___ in the money we are giving to them and so exchange it for the goods and services we ___6___. This confidence in turn ___7___ them to buy supplies for their shop or petrol for their bus and so on. In the simple way described above, we have shown the functions of money.
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The practice of using money is absolutely ___8___ for the ___9___ operation of businesses and international transactions in the modern global economy. In the absence of the sort of money we know, people would have rely on barter.
From the economists standpoint, money has three necessary functions. If any of these functions break down and cannot be met, people lose confidence in money. When this occurs, economic collapse is the only outcome.
| 1 | A | accidentally | B | extremely | C | virtually | D | controversially |
| 2 | A | on | B | up | C | round | D | over |
| 3 | A | is preventing | B | is providing | C | is prohibiting | D | is forbidding |
| 4 | A | note | B | matter | C | notice | D | indicator |
| 5 | A | confidence | B | hesitation | C | anxiety | D | doubt |
| 6 | A | give up | B | fail | C | require | D | call |
| 7 | A | gives over | B | ceases | C | is able | D | enables |
| 8 | A | inherit | B | essential | C | inherent | D | accessory |
| 9 | A | quiet | B | calm | C | smooth | D | rough |
XII. Tasks for thought.
1. Identify each of the following items as legal, token, commodity, or IOU money or, indeed, as not-money:
a) gold
b) 1 pound coin
c) cigarettes
d) cheque for 100$
e) petrol.
f) camera accepted in part-exchange
g) a building society deposit
h) pigs, turkeys, and cocoa nuts
2. Eight individuals in a baiter economy have and want the following goods: Alice has some haddock () but would like some apples; Barry has some gin but fancies blackcurrant jam; Carol is in possession of doughnuts () but wants coconuts; Daniel has obtained some jellied eels but really wants doughnuts; Eva has some figs but would prefer jellied eels; Gloria has coconuts but yearns for gin; Henry has apples but would like haddock. Can you work out a series of transactions which would satisfy all concerned?
3. Which of the following characteristics are necessary for an asset to function as money?
a) backed by a precious metal;
b) Authorized as legal tender by the monetary authorities
c) Generally acceptable as a medium of exchange;
d) Having value in future transactions.
4. Which of the following would be regarded as an asset to a customer of a commercial bank?
a) A current account bank deposit;
b) A special deposit;
c) trade bills held by the bank as reserve assets;
d) The bank's deposits at the Bank of England;
e) an overdraft;
f) Loans advanced by the commercial bank in US$.
5. Assess the liquidity and likely return of each of the following financial assets:
a) cash
b) equities
c) bonds
d) bills
e) industrial shares
