1. Money
VOŠ – 3. ročník – 1. semestr

2. 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

3. 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

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

5. 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

6. 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

7. 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
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8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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?

17. 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

18. 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

19. Resources
English in Economics, Miroslav Kaftan, Libuše Horáková:, Karolinum