Finance and financial system

Finance is the provision of money at the time when it is needed. It is a system of monetary relations leading to formation, distribution and use of money in the process of its turnover between economic entities.

The financial system is the network of institutions through which firms, households and units of government get the funds they need.

Finance in an economic system comprises two parts: public finance and finance of economic entities.

Public finance is the provision of money through taxes to be spent by national and local government authorities on projects of national and local benefit. It is a collective term for the financial flows and also the financial institutions of the public sector.

Public finance has the following four functions:

a) the provision of essential services;

b) the encouragement or control of particular sectors of the economy;

c) the implementation of social policy in respect of social services;

d) the encouragement of the growth of economy as a whole.

The major instrument of any financial system is the budget. In a market-oriented economy, the budget is the most important tool for achieving national priorities.

The budget is an estimate of national revenue and expenditure for the ensuing fiscal year. When expenditure exceeds the revenue the budget has a deficit.

In Ukraine, public finance is a sum of budgets of all levels of subjects of the state, extra-budgetary and reserve funds.

Budget preparation at the state level involves a number of institutions. The Ministry of Finance is the central coordinating institution in charge of compiling and presenting the budget. It has major inputs from ministries in various sectors of the economy and the state tax bodies.

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I. Remember the following words and word-combinations:

1. extreme	крайність
2. restriction	обмеження
3. demand	попит
4. state-controlled industry	контрольована державою промисловість
5. free market	вільний ринок
6. aim	ціль
7. benefit	користь
8. to interact	взаємодіяти
9. share	частина
10. taxation	оподаткування
11. transfer payments	трансферні виплати
12. economic freedom	економічна свобода
13. output	виробництво продукції
14. range	ряд
15. privatization	приватизація

II. Read and translate the text: