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Vocabulary




wages - to manufacture - lubricant , to interact - to determine - to affect the rate of economic growth unemployment - commodity money fiat money ( , ) equal - a content - to treat - government - to be in circulation   intrinsic value () to accept - to be required by law face value legal tender to issue ( ) forgery , monetary worth stable portable durable- divisible - change - means of payment  

Money is a heart of business. Money is needed to pay wages, to get materials for manufacturing goods, etc. Money is the lubricant which allows the various elements in the economic system to interact effectively.

The quantity of money in an economy is central to determine the state of that economy. It affects the level of prices, the rate of economic growth and the level of unemployment.

Types of money. The most important types of money are commodity money and fiat money. The value of commodity money is about equal to the material contained in it. The principal materials used for this type of money have been gold, silver, and copper. Golden coins are the examples of commodity money, because their gold content is a commodity. Commodity money is valuable apart from what it will buy. Gold, for example, is used in jewelry or dentistry, even when it is not used for money.

But some money is useless except when treated as money. Certain pieces of paper of which you would probably like (e.g. 100 dollars bills) are example of fiat money. Fiat money is paper money the value of which is fixed by government. Most minor coins in circulation are also a form of fiat money, because the value of the material of which they are made is usually less than their value as money. Fiat money does not have intrinsic value. It has value because people are willing to accept it. In this case people are required by law to accept the money as its face value. Fiat money in the form of banknotes is referred to as legal tender. Use of fiat money is ultimately based on faith faith in its purchasing power, in its general acceptability, and in the stability of the government that issues it.

Banknotes are usually made from a special high-quality paper, with watermarks, metallic strips, and other features against forgery. Highly sophisticated printing techniques are used, and banknotes designs have elements that are hard to copy.

A coin is a piece of metal which bears lettering, design or numbers showing its value. Until the 18th and 19th centuries coins were given monetary worth based on the exact amount of metal contained in them, but most modern coins are based on face value, the value that government chooses to give them, irrespective of the actual metal content. Coins have been made of gold, silver, copper, aluminium, nickel, plastic and in China even from pressed leaves. Gold proves to be the most popular. Since civilization began gold has been regarded as a symbol of power and wealth. Mankind never seems to have enough gold and the search for it has driven men mad. The need to search for gold has been compared to a disease, and is called gold fever.

Any object can serve as money if it is stable, portable, durable and divisible which are the main characteristic features of money. Money should be stable that means to come in pieces of standard value so that it does not have to be weighed and measured every time it is used. It should be portable that means easy to carry so that people can carry enough money to buy what they need. It should be durable so that not to spoil and not to die. If it wears out it can be replaced with new coins and paper money. Finally, it should be divisible that means divided into units so that people can make small purchases and receive change. Modern currency is easy divisible into smaller part with a fixed value for each unit.

In addition to the notes and coins in circulation in the modern world, cashless means of payment were introduced. These include cheques, bankers cards, and credit cards which have become more and more popular in recent years. The progress made in computer technology has led to new forms of cashless payments and it is possible to imagine a world where money in the form of coins and paper currency will no longer be used.





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