MONEY AND BANKING
(Гроші і банківська справа)
Money and its Funсtions. Деньги, их функции.
Although the crucial feature of money is its acceptance as the means of
payment оr medium of exchange, money has other functions. It serves as a
standard of-value, a unit of account, a store of value and ft a standard
of deferred payment. We discuss each of the functions of money in turn.
The Medium of Exchange. Средство обращения.
Money, the medium of exchange, is used in one-half of almost all
exchange. Workers exchange labour services 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 pay things we do
wish to consume. Money is the medium through, which people exchange
goods and services.
To see that society benefits from a medium of exchange, imagine a barter
A barter economy has 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. In order to see a film, you must hand over in exchange a good or
service that the cinema manager wants. There has to be a double
coincidence of wants. You have to find a cinema where the manager wants
what you have to offer in exchange.
Trading is very expensive in a barter economy. People must spend a tot
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 wasteful. The use of monеу - any commodity generally accepted
in payment for goods, services, and debts - makes the trading process
simpler and more efficient.
Other Functions of Моnеу. Другие функции денег
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 account, is the unit in which prices are quoted and accounts are
In Russia prices are quoted in roubles; in Britain, in pounds sterling;
in the USA, in US dollars; in France, in French francs. It is usually
convenient to use the units in which the medium of exchange is measured
as the unit of account as well. However there are exceptions. During the
rapid German inflation of 1922 - 1923 when prices in marks were changing
very quickly, German shopkeepers found it more convenient to use dollars
as the unit of account. Prices were quoted in dollars even though
payment was made in marks, the German medium of exchange.
The situation in Russia nowadays reminds of that of in Germany.
Money is a store of value because it can be used to make purchases in
To be accepted in exchange, money has to be a store of value. Nobody
would accept money as payment for goods supplied today if the money was
going to be worthless when they tried to buy goods with it tomorrow. But
money is neither the only nor necessarily the best store of value.
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