Money as the Unit of Amount Reading Answers
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Experta en el extranjero | Updated On - Jan 9, 2023
Money as the Unit of Amount Reading Answers contains sample answers about money and its function as a unit of account. Money as the Unit of Amount Reading Answers has 13 different questions. IELTS Money as the Unit of Amount Reading Answers contains three types of questions: choose the suitable heading, write appropriate letters and match a phrase. Candidates are required to read the IELTS Reading passage to choose the suitable heading from the given list. Candidates need to thoroughly go through each paragraph to answer the statement given with the correct option that matches with it. For the last set of questions, candidates are supposed to match a phrase A, B or C in the box with the writer’s opinions. Candidates can gain proficiency on diverse topics by undertaking IELTS Reading practice papers.
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Section 1
Read the Passage to Answer the Following Questions
Money as the Unit of Amount Reading Answers
- The most difficult aspect of money to understand is its function as a unit of account. In linear measurement we find the definition of a yard, or a metre, easy to accept. In former times these lengths were defined in terms of fine lines etched onto brass rods maintained in standard laboratories at constant temperatures. Money, however, is much more difficult to define because the value of anything is ultimately in the mind of the observer, and such values will change with time and circumstance. Sir Isaac Newton, as Master of the Royal Mint, defined the pound sterling (£) in 1717 as 113 grains of pure gold. This took Britain off silver and onto gold as defining the unit of account. The pound was 113 grains of pure gold, the shilling was 1/20 of that, and the penny 1/240 of it. By the end of the 19th century the gold standard had spread around most of the trading world, with the result that there was a single world money. It was called by different names in different countries, but all these supposedly different currencies were rigidly interconnected through their particular definition in terms of a quantity of gold.
- In economic life the prices of different commodities and services are always changing with respect to each other. If the potato crop, for example, is ruined by frost or flood, then the price of potatoes will go up. The consequences of that particular price increase will be complex and unpredictable. Because of the high price of potatoes, prices of other things will decline, as demand for them declines. Similarly, the argument that the Middle East crisis following the Iraqi annexation of Kuwait would, because of increased oil prices, have led to sustained general inflation is, although widely accepted, entirely without foundation. With sound money (money whose purchasing power does not decline over time) a sudden price shock in any one commodity will not lead to a general price increase, but to changes in relative prices throughout the economy. As oil increases, other goods and services will drop in price, and oil substitutes will rise in price, as the consequences of the oil price increase work their unpredictable and complex way through the economy. The use of gold as the unit of account during the days of the gold standard meant that the price of all other commodities and services would swing up and down with reference to the price of gold, which was fixed. If gold supplies diminished, as they did when the 1850s gold rushes in California and Australia were finishing, then deflation (a general price level decrease] would set in. When new gold rushes followed in South Africa and again in Australia, in the 1880s and 1890s, the general price level increased, gently, around the world, as there was more money in circulation.
- The end of the gold standard began with the introduction of the Bretton-Woods Agreement in 1946. This fixed the value of all world currencies relative to the US dollar, which in turn was fixed to a specific value of gold (US$0.35/oz). However, in 1971 the US government finally refused to exchange US dollars for gold, and other countries soon followed. Governments printed as much paper money or coinage as they wanted, and the more that was printed, the less each unit of currency was worth. The key problem with these government ‘fiat’ currencies is that their value is not defined; such value is subject to how much money a government cares to print. Their future value is unpredictable, depending as it does on political chance. In past economic calculations of the Australian Institute for Public Policy, incomes and expenditures were automatically converted to dollars of a particular year, using CPI deflators, which are stored in the Institute’s computers. When the Institute performs economic calculations into the future, it guesses at inflation rates and includes these guesses in its figures. The guesses are entirely based on past experience. In Australia most current calculations assume a three to four per cent inflation rate.
- The great advantage of the 19th century gold standard was not just that it defined the unit of account, but that it operated throughout almost the entire world. Anthony Trollope tells us in his diaries about his Australian travels in 1872 that a pound of meat, selling in Australia for twopence, would have cost ten pence or even a shilling in the UK. It was this price difference which drove investment and effort into the development of shipboard refrigeration, and opening up of major new markets for Australian meat, at great benefit to the British public. Today we can determine price differences between countries by considering the exchange rate of the day. In twelve months’ time, even a month’s time, however, a totally different situation may prevail, and investments of time and money made on the basis of an opportunity at an exchange rate of the day, may actually perform poorly because of subsequent exchange rate movements. The great advantage of having a single stable world currency is that such currency would have very high information content. It tells people where to invest their time, energy and capital, all around the world, with much greater accuracy and predictability than would otherwise be possible.
Section 2
Solution and Explanation
Questions 14-17
The reading passage has four sections. Choose the most suitable heading for each section from the list of headings below.
Write the appropriate numbers in boxes 14-17 on your answer sheet.
Note: There are more headings than sections so you will not use all of them.
- The Price of Gold
- The Notion of Money and its Expression
- The Rise of Problematic Modern Currencies
- Stable Money Compared to Modern “fiat” Currencies
- The Effects of Inflation
- The Interrelationship of Prices
- Stability of modern currencies
- SECTION I: ……………………….
Answer: ii
Supporting Sentence: Money, however, is much more difficult to define because the value of anything is ultimately in the mind of the observer. And such values will change with time and circumstance
Keyword : money, value, observer, change, time, circumstance
Keyword Location: paragraph 1, line 4-6
Explanation: As per paragraph A, money is way harder to describe because an object's value ultimately depends on the observer. And as time and circumstances change, so will these ideals. This shows us how defining the concept of money is challenging. In many nations, it went by various names. But due to their unique definition in terms of a gold supply, all of these ostensibly distinct currencies were firmly linked. We understand that although money can be expressed in many different ways, they are all interconnected. The answer is therefore ii.
- SECTION II: ………………………
Answer: vi
Supporting Sentence: In economic life the prices of different commodities and services are always changing with respect to each other.
Keyword : economic, commodities, services, changing
Keyword Location: paragraph 2, line 1
Explanation: As per the second paragraph, prices of various goods and services are constantly fluctuating in relation to one another in economic life. The relationship between prices is highlighted in this sentence and in the several examples that follow. The answer is therefore vi.
- SECTION III: ………………………
Answer: iii
Supporting Sentence: as much paper money or coinage as they wanted, and the more that was printed, the less each unit of currency
Keyword : paper, coinage, printed, currency
Keyword Location: paragraph C, line 5-6
Explanation: Governments were able to print as much coinage or paper money as they desired, according to paragraph C. Additionally, each unit of currency lost value as more was created. The fact that the value of these "fiat" currencies issued by the government is unknown is their main flaw. Depending on how much money a government wants to print, this figure may change. This shows that even if modern currencies are uncertain and problematic, they become significant when the government produces them. The answer is therefore iii.
- SECTION IV: ………………………
Answer: iv
Supporting Sentence: 19th century gold standard was not just that it defined the unit of account, but that it operated throughout
Keyword : gold standard, account, operated
Keyword Location: paragraph D, line 1-2
Explanation: As per paragraph D, the gold standard's main benefit went beyond simply defining the unit of account. But it did function practically everywhere in the world. The author also believes that having a single, stable global currency would have a significant informational advantage. The benefits of 19th-century stable money are contrasted with those of contemporary "fiat" currencies. The answer is IV.
Questions 18-21
Using information from the text, match the following causes with a result.
Write the appropriate letters in boxes 18-21 on your answer sheet.
- Oil substitutes become more expensive
- Oil substitutes drop in price
- People developed techniques of transporting it to other places
- More people went to live in Australia
- The price of other things goes down, because fewer people could afford to buy them
- People used gold instead of silver as money
- All prices went up slightly, everywhere
- There is no observable effect
- All prices went down, everywhere
- The price of potatoes goes up…
Answer: E
Supporting Sentence: Because of the high price of potatoes, prices of other things will decline, as demand for them declines
Keyword : high rice, demand, decline, price
Keyword Location: paragraph B, line 4
Explanation: According to paragraph B, if demand for other goods declines as a result of the high price of potatoes, so will their prices. This explains why other goods' prices decrease as the price of potatoes rises (declines). As fewer people can afford to buy them, demand for them is decreasing. Thus, the answer is E.
- The amount of gold available went up………….
Answer: G
Supporting Sentence: When new gold rushes followed in South Africa and again in Australia… the general price level increased, gently.
Keyword : gold rushes, price increased, South Africa, Australia
Keyword Location: paragraph B, last few lines
Explanation: As per paragraph B, the general price level grew, albeit gradually, after new gold rushes in South Africa and Australia. Due to the increased availability of money, it grew globally. We can infer that when the supply of gold increased as a result of a fresh gold rush, prices would generally go up a little bit. Therefore, G is the correct answer.
- The amount of gold available went down………….
Answer: I
Supporting Sentence: If gold supplies diminished, as they did when the 1850s. Then deflation (a general price level decrease] would set in.
Keyword : gold supplied, diminished, deflation, general price
Keyword Location: paragraph B
Explanation: As per paragraph B, if gold supplies decreased, as they did as the 1850s gold rushes in California and Australia were coming to an end. Deflation would then begin, which is a widespread decline in price levels. Therefore, it is obvious that if the amount of gold in circulation decreased, the prices of everything would also decrease. The answer is thus I.
- Meat in Australia was cheaper than elsewhere …………….
Answer: C
Supporting Sentence: a pound of meat, selling in Australia for twopence, would have cost ten pence or even a shilling in the UK
Keyword : pound, meat, two pence, ten pence, shilling
Keyword Location: paragraph D, line 3-4
Explanation: As per paragraph D, a pound of meat that costs two pence in Australia would have cost ten pence or even a shilling in the UK. This cost disparity was what spurred research and development for shipboard refrigeration. Additionally, significant new markets for Australian beef have opened up, greatly benefiting the British people. It denotes that beef was less expensive in Australia than it was abroad. Therefore, methods of transportation, such as shipboard refrigeration, were devised. The answer is therefore C.
Questions 22-26
In the reading passage, the writer compared money based on a gold standard, and fiat money.
Using the information in the passage, match a phrase A, B or C in the box with the writer’s opinions in each question to show which kind of money is meant.
Write the appropriate letter in boxes 22 – 26 on your answer sheet.
- Money based on a gold standard
- Government fiat monopoly currencies
- Both money based on a gold standard and fiat currencies
- The writer states that it has a clearly defined value ……………
Answer: A
Supporting Sentence: The pound was 113 grains of pure gold, the shilling was 1/20 of that, and the penny 1/240 of it.
Keyword : pound, shilling, penny
Keyword Location: paragraph A, line 8
Explanation: The pound had 113 grains of pure gold, the shilling 1/20 of that, and the penny 1/240 of that, according to paragraph A. The gold standard had been adopted by the majority of trading nations by the turn of the 20th century. The end outcome was the creation of a single global currency. It implies that the value of money that was based on a gold standard was well understood. The answer is therefore A.
- The writer states that its value by definition varies over time ………………
Answer: B
Supporting Sentence: The key problem with these government ‘fiat’ currencies is that their value is not defined. Such value is subject to how much money a government cares to print.
Keyword : problem, government, fiat currencies, money
Keyword Location: paragraph C, line 8
Explanation: As per paragraph C, the main issue with these government-issued "fiat" currencies is that it is impossible to determine their worth. Depending on how much money a government wants to print, this figure may change. The answer is B because it is obvious from the statement that the value of government fiat monopoly currencies changes over time.
- The writer describes its future value as predictable ……………….
Answer: A
Supporting Sentence: during the days of the gold standard meant that the price of all other commodities and services would swing up and down
Keyword : gold standard, price, commodities, swing, up and down
Keyword Location: paragraph B, line 13-14
Explanation: As per paragraph B, the price of all other goods and services would fluctuate because gold was used as the unit of account during the time of the gold standard. Particularly in relation to the gold price, which was set. This claim makes the point that the value of money pegged to the gold standard will remain stable in the future. Because it is based on the fixed price of gold. The answer is therefore A.
- The writer knows or can calculate its past value ……………
Answer: C
Supporting Sentence: it defined the unit of account, but that it operated throughout almost the entire world. Today we can determine price differences between countries by considering the exchange rate of the day.
Keyword : unit, operated, determine, differences, currencies
Keyword Location: paragraph D
Explanation: As per paragraph D, the 19th-century gold standard had several other benefits outside only defining the unit of account. But it did function practically everywhere in the world. It is said that by taking the current exchange rate into account, we can now establish pricing differences between nations. We can infer from these two words that prices for fiat currencies and money with a gold standard are set. It is simple to determine its previous value. The answer is therefore C.
- The writer believes it makes international investment easier ………………
Answer: A
Supporting Sentence: The great advantage of the 19th century gold standard was not just that it defined the unit of account. But that it operated throughout almost the entire world.
Keyword : advantage, gold standard, operated, throughout, world
Keyword Location: paragraph D, line 1
Explanation: According to paragraph D, the 19th-century gold standard had several other benefits outside only defining the unit of account. But it did function practically everywhere in the world. Money based on a gold standard facilitates foreign investment because it is used globally. The answer is therefore A.
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