UNIT 11 MONEY AND ITS FUNCTIONS

VOCABULARY
- Money
- Currency: The money used in a particular country is referred to as its
currency.
- (local currency, foreign currencies)
- Strong/ weak currencies
- Means of payment/ medium of exchange
- Measure of value/ unit of account
- Store of value
- Standard of deferred payment
- Exchange (v) + (n)
- Settle (v)
- Commodity money
- Token money
Tra từ điển Anh – Anh để có định nghĩa bằng tiếng Anh, học phát âm, và tìm
câu ví dụ phù hợp
Foreign currency: the currency used in other countries (and not in your own)
- Britain earns billions in foreign currency from its insurance market.
Money is the coins or bank notes that you use to buy things, or the sum that you
have in a bank account.
- A lot of the money that you pay at the cinema goes back to the film
distributors.
- Players should be allowed to earn money from advertising.
- She probably had more money but she didn't spend it.
Legal tender is money, especially a particular coin or banknote, which is officially
part of a country's currency at a particular time.
The denomination of a banknote or coin is its official value.
- … a pile of bank notes, mostly in small denominations.
Medium of exchange: anything used as a measure of value in exchange for goods
and services; currency, checks, etc.
A token is a piece of paper or card that can be exchanged for goods, either in a
particular shop or as part of a special offer.
Token money is a metal or plastic disc, such as a substitute for currency for use in
slot machines
TOPIC QUESTIONS
1. What are 4 functions of money? How is money used as each of these
functions?
- Medium of exchange (Means of payment)
- Measure of value (Unit of account)
- Store of value
- Standard of deferred payment.
Sub – questions:
What is a means of payment? /
As a medium of exchange, how is money used? (for what purpose?)
1.1 Medium of exchange
Definition: Medium of exchange is anything that is widely accepted or legally
regulated as payments for goods and services and settlements of debts.
As a medium of exchange, money is used to make payments for goods and
services, as well as make settlements for debts.
Settle debts = make settlements of debts.
Pay (v) (make payments) for goods & services: thanh toán cho hang hóa và dịch vụ
Settle (v) debts: thanh toán các khoản nợ
If you settle a bill or debt, you pay the amount that you owe.
- I settled the bill for my coffee.
- They settled with Colin at the end of the evening.
Settlement (n)
The settlement of a debt is the act of paying back money that you owe.
- ...ways to delay the settlement of debts.
Barter (v) to barter sth for sth
If you barter goods, you exchange them for other goods, rather than selling them
for money.
- They have been bartering wheat for cotton and timber.
In a barter economy, goods and services are traded directly.
1.2. Measure of value
Measure of value (unit of account) - the function of money that enables the user to
keep accounts, value transactions, etc.
As a unit of account, money is used to quote prices and to keep accounts.
It is more convenient to use money as a means of payment as well as a unit of
account, because there is no need to exchange one currency for another.
1.3. Store of value
- As a store of value, money is used to make purchase in the future. / money is
saved for future use.
- Money is neither the unique nor the best store of value, because money can
reduce its value over time due to inflation.
1.4. Standard of deferred payment
Or unit of account over time.
- As a standard of deferred payment, money is used to make payments for
debts in the future
- This function becomes more important when installment buying (hinh thuc
mua tra gop) is developing/ in response to the expansion of the installment
buying.
Payments are made for installment buying:
+ Deposit (tiền đặt cọc) – (tra nghĩa tiếng Anh phù hợp)
+ regular repayments
Until the debts are used up.

To buy sth on credit:

Repay (v) – repayments (n)
2. Types of money
Revolution of money
 In a barter economy: kinh tế trao đổi trực tiếp (tìm định nghĩa bằng tiếng
Anh): goods and services are traded directly without money
 In primitive society
- Common goods which function as money, for example, sheep, sea shells,
animal’s teeth, … are called commodity money.
 In modern society:
- Gold coins, Silver coins (commodity money)
Token money:
- Banknotes and metal coins
- Checks (cheques)/ L/C = letter of credit (thư tín dụng)
- Plastic cards (ATM cards, visa cards, AE (American Express), …
- E-money (electronic)

2. What are two main types of money? What are differences between
them?
Commodity money Token money
- Gold coins/ silver coins - Banknotes and metal coins/
- The monetary value (the Checks (cheques)/ Plastic cards
purchasing power) of a - The monetary value or
commodity money is the same purchasing power of a
as its material value. banknote greatly exceeds its
- It is more difficult and material value. (a high quality
dangerous to bring commodity piece of paper)
money along in large - It is much easier and safer to
quantities. bring a token money, such as a
visa card.

READ AND TRANSLATE INTO VIETNAMESE

In Economics, “standard of deferred payment” is a function of money that
indicates a widely accepted way to value a debt such that a person can acquire
goods at present and pay for them in the future. Standard of deferred payment is
considered to be a direct result of two other functions of money namely “store of
value” and “unit of account”. However, for money to function as a deferred
payment standard, it must retain value, it must also store value.
Definition Of Standard Of Deferred Payment
Standard of deferred payment is one of the four functions of money. Here, money
is used as a standard benchmark or a contract for specifying future payments for
current purchases. In other words, standard of deferred payment is an accepted way
to settle debt in a given market.
Standard of deferred payment conveys contrast from the elements of cash which is
a quick mechanism of trade or store of significant worth; while Standard of
deferred payment goes about as a medium by which future installments will be
made.
Functions Of Money
There are four basic functions of money:
Unit of account:
As mentioned above, money serves as a unit of account, providing a common
measure of the value of goods and services being exchanged. Everybody around
the world thinks about cash profitable. It's a painful way for sellers to esteem stock
and endeavors and buyers to choose if the estimation of the incredible benefits
exchanging for money.
If you esteem someone or something, you respect or admire them.
An endeavor is an attempt to do something, especially something new or original.
A medium of exchange:
Apart from serving as a unit of account, money readily acts as a medium of
exchange to facilitate transactions. It fills in as a medium trade that is
acknowledged in all exchanges, by all gatherings, paying little respect to whether
they want every others' products and enterprises. In contrast to the trade
framework, where the trading of products relied on a twofold fortuitous event of
needs, cash is free from any such reliance and enables a client to fulfill his/her
arrangement of necessities.
Standard of deferred payment:
As mentioned earlier, the standard of deferred payment is also one of the functions
of money. Money facilitates the acts of borrowing and lending. Since money
enables current transactions to be discharged in future, it has become a standard of
deferred payments.
A store of value:
Money also serves as a store of value or a store of purchasing power. It tends to be
held over some undefined time frame and used to back future installments. More-
over, when individuals set aside some cash, they get the confirmation that the cash
spared will have esteem when they wish to spend it later on.
How Does The Standard Of Deferred Payment Work?
Deferred payments are the payments which are postponed for the future. In the
case of these payments, money enables current transactions to be discharged in
future. You’ll be able to understand this concept better with the help of an
example.
Let’s take the example of a business and consumers where the money would be
used as a standard of deferred payment. Suppose, a business, say, an electronic
store starts running promotional sales and offers. That’s when it would use
deferred payments to entice new customers. Wondering how? Well, the store
would probably offer a deferred payment plan for the first five months when a
consumer buys a new appliance. Due to this, the customer would be required to
make only interest payments for the first five months. Once these five months end,
the customer is required to make regular payments for the duration of the consumer
agreement.
Relation Of Debt With Standard Of Deferred Payment
Debt is a form of deferred payment. Since the value of money fluctuates over time
via inflation and deflation, the value of deferred payments (the real level of debt)
also fluctuates. A device is termed "legal tender" if it serves as a medium to pay off
debts. The US dollar is one of the best examples of “legal tender” as it is not
backed by gold or any other commodity but can be used to pay off debts.
So, these were the basics of “Standard of deferred payment”. Sound quite easy,
don’t they? Well, that’s not what a student pursuing a higher degree in Finance
would think. That’s because such students find it quite hard to juggle with the
lengthy syllabus, exam pressure and an additional burden of assignments on topics
like “Standard of Deferred payment”. There may be a lack of clarity of concepts
even after attending long lectures. That’s when there’s a need to rush to the library
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