Exploring Money as the Unit of Account: IELTS Reading Passage with Questions & Answers

Money as the Unit of Account Reading Passage:

Money, in its myriad forms, not only greases the wheels of commerce but also serves as a fundamental unit of account—a measure used to set prices and make economic judgments. The role of money as a unit of account permeates every level of financial transactions, from the price tags in a local market to the valuation of multi-billion-dollar corporations on stock exchanges.

The origin of money as a unit of account can be traced back to ancient times when bartering was replaced by more convenient forms of exchange. Livestock, grains, and even shells have been used historically as units of account before modern currency took precedence. This shift introduced a standardized method for pricing goods and services, simplifying trade and economic interaction.

In today's global economy, money as a unit of account has evolved beyond mere physical cash. Digital transactions, cryptocurrencies, and other forms of virtual money continue to redefine the concept. However, the basic principle remains unchanged: the unit of account must be widely accepted, stable, and divisible to facilitate economic decision-making.

Central to the idea of money as a unit of account is its ability to provide a common valuation method. It allows for the efficient comparison of the cost of different goods and services, enabling consumers and businesses to make informed choices. Moreover, it acts as a stable reference point in contracts and agreements, ensuring clarity and fairness in economic dealings.

The omnipresence of money as a unit of account in economic theory and practice underscores its importance. It’s not just a medium of exchange or a store of value; it is a comparative measure that underpins the very structure of modern finance.
 

Questions:

Q1. What is the primary function of money as a unit of account?
A. To facilitate digital transactions
B. To act as a medium of exchange
C. To set prices and make economic judgments
D. To store value for future use

Q2. Fill in the blank: Before modern currency, items like livestock, grains, and shells were used as units of account to __________.

Q3. True or False: Digital transactions have not changed the concept of money as a unit of account.

Q4. Money as a unit of account must be all the following EXCEPT:
A. Widely accepted
B. Highly volatile
C. Divisible
D. Stable

Q5. Fill in the blank: Money as a unit of account provides a __________ valuation method for different goods and services.

Q6. True or False: Money as a unit of account is important for ensuring clarity and fairness in contracts and agreements.

Q7. What characteristic is NOT necessary for money to function as a unit of account?
A. Physical form
B. Divisibility
C. General acceptance
D. Stability

Q8. Fill in the blank: The concept of money as a unit of account dates back to the times when __________ was the primary method of exchange.

Q9. True or False: Cryptocurrencies have lessened the importance of money as a unit of account.

Q10. Fill in the blank: The role of money as a unit of account is evident in setting prices from a local market to __________.

Answers and Explanations:

A1. C. To set prices and make economic judgments

Money as a unit of account is fundamentally used to set prices and assess the value of goods and services.
A2. Standardize trade

Items like livestock and grains were used historically to bring standardization to trade, which was a precursor to modern currency.
A3. False

Digital transactions have evolved the concept by introducing virtual money but haven't changed the foundational principle of money as a unit of account.
A4. B. Highly volatile

Money must be stable to function effectively as a unit of account; volatility would undermine its reliability.
A5. Common

A common valuation method is necessary for comparing the cost of different goods and services.
A6. True

Using money as a unit of account in contracts ensures that terms are clear and equitable for all parties involved.
A7. A. Physical form

Money does not need to be in physical form to serve as a unit of account, as evidenced by digital currencies.
A8. Bartering

Bartering was the primary method of exchange before the introduction of money as a unit of account.
A9. False

Cryptocurrencies have introduced new forms of money but still serve as a unit of account within their respective systems.
A10. Stock exchanges

Money as a unit of account is critical for setting prices on a broad scale, including local markets and stock exchanges.

Understanding 'money as the unit of account' is essential for anyone preparing for the IELTS exam, as it reflects a vital aspect of everyday life and economic literacy. This article not only provides a thorough exploration of the concept but also equips IELTS learners with a variety of question types to challenge and build their reading comprehension skills. The accompanying explanations clarify the rationale behind each answer, deepening the test-taker's understanding. By engaging with such comprehensive material, IELTS candidates can enhance their preparation, ensuring they approach their test with confidence and the knowledge required to achieve a high score.