ENGLISH FOR STUDENTS OF ECONOMICS UNIVERSITY OF MSILA DEPARTEMENT OF MANAGEMENT

‫ علوم التسيير‬:‫قسم‬ ‫ اللغة اإلنجليزية لطلبة االقتصاد‬:‫محاضرات في مقياس‬

0200/0202 :‫السنة الجامعية‬ ‫ الثانية جذع مشترك‬:‫السنة‬

‫ محمد عوامر‬:‫األستاذ‬

Lecture 01: Money

Read the Text carefully meanwhile; underline the New Words.

I-Meaning of money:
any economy, people produce goods and services and trade them for other goods and
services. In the absence of money, this trade occurs through barter, in which one good
or service is traded directly for another. Barter was
the means of trade in early societies. Often it took
place in a village market. Barter is cumbersome. For it to work,
individuals must experience a double coincidence of wants. This
means I have something that you want and you have
something I want. Fortunately, in the twenty-first century,
money is used almost everywhere. Thanks to money,
everyone can be paid, and travelers can buy dinner wherever
they go.

oney is a word that economists use differently from most

people. In everyday speech, money is often used as a
synonym for income or wealth. Someone might remark that
“neurosurgeons make a lot of money,” meaning their annual incomes
are high. Or you might hear that “Bill Gates has a lot of money”
because his wealth—the total value of his assets—is $133 billion.
Gates’s wealth includes assets such as Microsoft stock, other
securities, and real estate. For economists, by contrast, money is a
narrow class of assets with special properties. Money serves the economy as the medium of
exchange, the unit of account, and a store of value.

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 ENGLISH FOR STUDENTS OF ECONOMICS UNIVERSITY OF MSILA DEPARTEMENT OF MANAGEMENT

II-Functions of money:
II-1- Money as a medium of exchange

Although money serves several functions, it is defined by its primary role: people use it as
the medium of exchange. That is, people use money to purchase goods and services. Money is
whatever a grocery store or movie theater accepts as payment. In today’s economy, dollar bills are
one form of money. The balances in people’s checking accounts are also money, because many
goods and services can be bought by writing a check or debiting an account electronically. Stocks
and bonds are not money because you can’t walk into a store and trade them for groceries. Rich
people keep most of their wealth in securities and real estate, but they keep enough in cash and
checking accounts to buy groceries, pay for haircuts, and otherwise purchase the goods and
services they desire. The amount of wealth that people choose to hold in money is called money
demand.
II-2- Money as a unite of account:
In addition to serving as the medium of exchange, money has another related role in the
economy. Money is the unit of account. This means that prices, salaries, and levels of wealth are
measured in money. Dollar bills are money in the United States, and so prices are quoted in
dollars. To see why this measurement function is important, think again of an economy without
money. In this world, prices would have to be set in units.

II-3- Money as a store of value:

Traditionally, economists have cited a third function of money, one beyond its roles as the
medium of exchange and unit of account. Money is a store of value—a form in which people can
hold wealth. Money’s store-of-value function has become less important in advanced economies.
In most economies today, holding money is better than holding milk, but holding bonds is better
still, because bonds pay more interest. People with financial savvy use money as a medium of
exchange, but they hold most of their wealth in other assets. Exceptions occur, mainly in poor
countries. In some places, the financial system functions so poorly, that few assets are more
attractive than money. People hold much of their wealth in cash. But there is a twist: most of this
cash is foreign currency—U.S. dollars or euros—rather than the local money. This currency switch
results from inflation.
Reference: Laurence M. Ball (2012). Money, Banking, and Financial Markets. (26-29) Worth Publishers. New York.

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 ENGLISH FOR STUDENTS OF ECONOMICS UNIVERSITY OF MSILA DEPARTEMENT OF MANAGEMENT

Key concepts
“In every day conversation, we use “money” to denote many different things. We use it as a synonym
for income: “making money.” We use it as a synonym for wealth: “. The text below gives you the main
differences between money, some similar terms, and their precise meanings in economics. Read the text
below to understand the precise meaning of each term.

1- Money is what can be used to pay for transactions. Money is currency and checkable deposits at
banks.
2- Income is what you earn from working plus what you receive in interest and dividends. It is a
flow— something expressed in units of time: weekly income, monthly income, or yearly income.
3- Saving is that part of after-tax income that you do not spend. It is also a flow. If you save 10% of
your income, and your income is $3,000 per month, then you save $300 per month.
4- Your financial wealth, or wealth for short, is the value of all your financial assets minus all your
financial liabilities. In contrast to income or saving, which are flow variables, financial wealth is
a stock variable. It is the value of wealth at a given moment in time. At a given moment in time,
you cannot change the total amount of your financial wealth. It can only change over time as you
save or dissave, or as the value of your assets and liabilities change. But you can change the
composition of your wealth; you can, for example, decide to repay part of your mortgage by
writing a check against your checking account. This leads to a decrease in your liabilities (a
smaller mortgage) and a corresponding decrease in your assets (a smaller checking account
balance); but, at that moment, it does not change your wealth.
5- Savings (plural) is sometimes used as a synonym for wealth — the value of what you have
accumulated over time.
6- Financial assets that can be used directly to buy goods are called money. Money includes currency
and checkable deposits — deposits against which you can write checks. Money is also a stock.
Someone
References: who is wealthy
-Blanchard, might have
Olivier (2017). only small money
Macroeconomics.. holdings
Pearson — say,
Education, $1,000,000
Inc. in stocks but
Boston. USA.
only $500 in a checking account. It is also possible for a person to have a large income but only
small money holdings — say, a monthly income of $10,000 but only $1,000 in his checking
account.
7- Investment is a term economists reserve for the purchase of new capital goods, from machines to
plants to office buildings. When you want to talk about the purchase of shares or other financial
assets, you should refer them as a financial investment. Learn how to be economically correct: Do
not say “Mary is making a lot of money”; say “Mary has a high income.” Do not say “Joe has a
lot of money”; say “Joe is very wealthy.¨

References: Blanchard, Olivier (2017). Macroeconomics.. Pearson Education, Inc. Boston. USA.

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