Money VOŠ – 3. ročník – 1. semestr

What is money? any goods that function as a medium of exchange is socially and legally accepted in payment for goods and services in common usage, money refers more specifically to currency © Lenka Lexová

Functions of money a medium of exchange a unit of account enables people to exchange goods and services for commodities it is a means of transactions a unit of account a measure of value which helps to compare the value of various goods and services a store of value a form of money or financial capital that is saved, stored for later use © Lenka Lexová

Evolution of money Direct exchange of goods Commodity money Precious metals – gold, silver Paper money Fiat money Credit money © Lenka Lexová

Direct exchange of goods Commodity money exchange of goods for other goods of equal value Commodity money especially chosen goods with a given value accepted by the society e. g.: cattle, shells, salt, tobacco etc. Precious metals – gold, silver Paper money its value was originally based on the amount of gold it contained © Lenka Lexová

Fiat money Credit money its value is agreed on by the government regardless of its content of precious metals banknotes are protected against counterfeiting Credit money a financial instrument that cannot be repaid immediately e. g. bonds, money market accounts © Lenka Lexová

Money supply - it is the amount of money which is available for purchasing goods or services at a certain moment - it helps to indicate inflation or growth - it consists of: Transaction money Near money © Lenka Lexová

Transaction money Near money used by firms, households and individuals coins, notes, bank money stored in current accounts (Europe) or in checking accounts (USA)‏ Near money some time is needed before this means of payment can be turned into cash or another type of transaction money term deposits, credits, mortgages, bonds etc. © Lenka Lexová

Interest a fee paid on borrowed money the percentage of the principal which is paid as fee - the interest, over a certain period of time, is called the interest rate money earned by depositing in long-term or short-term deposit accounts © Lenka Lexová

Exchange rate expresses the price of a currency which is traded on the foreign exchange market the currency tends to: appreciate in times of economic growth depreciate in depression fluctuate as a result of government intervention the currency can be under valuated or over valuated © Lenka Lexová

a floating exchange rate is a changeable rate caused by appreciation and depreciation of a currency a managed floating exchange rate is a result of government intervention done in to stabilize the exchange rate a fixed exchange rate the rate of the local currency is fixed to one or more foreign currencies © Lenka Lexová

Purchasing power tells how many goods it is possible to buy with one currency unit purchasing power parity compares the purchasing power of different currencies in their home countries for a given basket of consumer goods helps to compare the standards of living of two or more countries © Lenka Lexová

Monetary policy is the process by which a government, central bank, or monetary authority regulates the money supply to achieve specific goals such as: economic growth stable prices maximum employment moderate interest rates © Lenka Lexová

Instruments of monetary policy Tight money used in times of inflation reduces the money supply and limits investments Easy money used in times of recession activates growth of aggregate demand Interest rates Loan terms Minimum reserve requirements Discount rates Open market operations ©Lenka Lexová

Listening Money Do you believe that money can bring happiness? Standard of living What are common monthly expenses for a student living on his/her own? How about a family of four? Write a list of your expenses, figure out how much money you spend on each area (living, food, free time, holiday, loans etc.) ©Lenka Lexová

Reading Public debt What is the situation in the Czech Republic? Is our national budget in a surplus or in a debt? What is the danger of a public debt? Are there any possibilities how to reduce it?

Discuss Is keeping a budget important in managing your money? Why/Why not? Do you know any family member or friend who got into debt? Together with your partner discuss about your own financial situation. Suggest on how to avoid debts. Search for the top five ways to manage your money better. Do you share your money or keep it only for yourself (give money to charities etc.) ©Lenka Lexová

Discuss with your partner Is making money important to you? Why/Why not. Where can you make money in your home town? Is making money quick and easy? What do you think about making money on the internet? Is it safe? ©Lenka Lexová

Resources English in Economics, Miroslav Kaftan, Libuše Horáková:, Karolinum 2004 www.wikipedia.org http://www.listenaminute.com/