POSIBNIK_1_KURS

Currency that is found today in most countries is fiat money. Unlike representative money, fiat money is not backed by any commodity, and is absolutely irredeemable. It serves as legal tender by a government decree, or fiat which means in Latin ‘let it be done’. “Legal tender for all debts, public and private” is written on the US dollar. The value of fiat currency is based merely on trust that people will accept it in payment for goods and services and that its value will remain relatively stable. A prime example of fiat money is the new international currency - the euro. The introduction of the euro changed the face of money, superseding many of the world's oldest currencies.

Whatever the type of money, it should be judged on how well it performs its major functions: (1) a medium of exchange, (2) a measure of value, and (3) a store of value. As a matter of fact, money is what money does.

FUNCTIONS OF MONEY

Money is a medium of exchange

Firstly, money is the mechanism that enables parties to make an indirect exchange of goods and services. In a money economy, if you want to buy or sell something, you don’t need to find someone who has what you want and who wants what you have. Money effectively eliminates the problem of a double coincidence of wants by serving as a medium of exchange. It is easily accepted in all transactions, by all parties, regardless of whether they desire each others’ goods and services. What is important, money transmits value through space. In a barter system, this is very difficult because transfer of large items and perishable goods makes moving around rather problematic.

Money is a measure of value or a unit of account

Secondly, money is the benchmark for measuring value of goods and services. If you want to buy a mobile telephone, you don’t need to calculate how

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much tobacco or honey will be necessary to buy it. Instead, you see the product’s price, set in terms that everyone can understand, and you immediately know how cheap or expensive it is, comparing that value to other products.

Money is a store of value

Thirdly, money acts as a store of value for future use or for storing wealth. By saving money, you are able to spend some now and some later. In this way money transmits value over time. This couldn’t occur in a barter economy because not all commodities could be stored for future use. Some items were perishable and subject to decay while others might die. Food items, expensive spices, fine silks, oriental rugs, etc. could not be suitable for use as money.

Note: In the time of high inflation or political instability, money may not be a good store of value.

Money is a means of liquidity

In addition to these three functions of money, economists often point out the fourth criterion – a means of liquidity. Liquidity describes the ease with which an item can be traded for something that you want, or into the common currency within an economy. Money is the most liquid asset because it is universally recognised and accepted as the common currency. It has a big advantage over other assets. It can be used immediately to purchase goods and services while converting gold, diamonds, or a house into cash takes time and effort. In this way, money gives consumers the freedom to trade goods and services easily without having to barter.

In a modern society, money has several basic characteristics:

Portability or transportability. Modern money is portable. It can be

easily carried from place to place. Paper money has proved highly convenient in this regard.

Divisibility. Money can be divided into small units without destroying its value so as to make large and small transactions.

Durability. Money is long lasting, able to withstand the wear and tear in changing hands. A good illustration of the durability of money is the fact that

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money left in pockets withstands the wash. Coins are often made with ridges around the rim to prevent coin shaving or debasement.

However, it is not only the physical durability that matters. Of no less importance is its social and institutional durability. People are willing to accept money in payment for one good because they are confident that they can use it at a later time for some other good or service. It works as a medium of exchange precisely because it stores value from one transaction to another. And this requires durability. While government-issued paper currency might remain physically intact for centuries, its ability to function as money depends on the institutional durability of the government.

Stability. The value of money must be more or less stable over long periods of time so people do not lose its purchasing power if they use their money at a later time.

Recognisability and acceptability. The most essential attribute of money is its quality of being easily recognised and readily accepted as a medium of exchange.

Relative scarcity. For the purpose of controlling the money supply, money must be scarce but not too scarce.

And finally, the monetary item must be difficult to counterfeit.

Money that is easily duplicated ceases to be a medium of exchange.

Modern money takes two primary forms: cash, which is paper currency and metal coins, and cheques (Am. checks). Banknotes and coins are commonly used for small person-to-person transactions. Cheques, debit cards and wire transfers are used as a means of transferring larger amounts of money between bank accounts more easily. Electronic money is non-physical currency that is traded and used over the Internet. The percentage of money moved electronically is growing dramatically these days.

To summarise, money is any commodity or token used by society as a medium of exchange, a measure of value and a store of value. The invention of money is probably one of the most important inventions in the world. Money helps

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to bring simplicity and organisation to our economy. Without the use of money, trade would be reduced to barter. Money makes it easier to trade, borrow, save, invest, and compare the value of goods and services. Thus, money may be regarded as a keystone of modern economic life.

Despite predictions of a "cashless society" relying on electronic payments, the public demand for currency continues to grow. Debit cards used for purchases and transaction records could greatly reduce the need for cash, but paper currency still has the advantage of privacy. Will the present forms of currency last or change eventually? Only time can give the answer.

Language notes:

As time went by and society advanced the volume and range of goods and services

… – У силу того, як час ішов і суспільство розвивалось, обсяг і асортимент товарів і послуг …

It was money that solved the basic problems … – Тільки з виникненням грошей вдалося вирішити основні проблеми …

Зворот ‘It is … that’ використовується для того щоб виділити найбільш важливе в реченні, надати йому більшу емоційність. При перекладі зазвичай використовують слова «саме», «це», «тільки» .

The oldest recorded use of money dates back to ancient Mesopotamia ... –

Історично, перше використання грошей зафіксовано у давній Месопотамії ...

Whatever the type of money, it should be judged on how well it … – Якого б виду не були гроші, оцінювати їх потрібно за тим наскільки добре вони …

Despite predictions of a "cashless society" relying on electronic payments, the public demand for … – Незважаючи на прогнозування «безготівкового»

суспільства, яке засноване на системі електронних платежів, попит на …

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has the advantage of privacy – … мають перевагу конфіденційності; without having to barter – … не використовуючи бартер;

a prime example – відмінний/чудовий приклад

cowrie – a small yellowish-white shell with a fine gloss, used by various peoples as money. It is abundant in the Pacific and Indian oceans, and is collected in the Maldives and the East Indian islands, in Siam, and on parts of the African coast. It was used in

China as a medium of exchange in primitive times, and also in Bengal. It is still so employed in Africa, and in the countries of Further India.

VOCABULARY FOCUS

Ex.1. Find the English equivalents in the text.

Співпадання потреб, товарні гроші, представницькі гроші, кредитні гроші,

нерозмінні паперові гроші, банкноти і монети, золотий стандарт, у якості посередника, виконувати функції засіб обміну, міра вартості, засіб накопичення (засіб збереження вартості), рахункова одиниця, еталон вимірювання, ліквідний засіб, законний платіжний засіб, єдина валюта,

переказ (грошей), банківський рахунок, гарний приклад, наріжний камінь.

Ex.2. Give Ukrainian equivalents of the following words and phrases.

The concept of money, the origins of money, the emergence of money, the most essential attribute, general characteristics, solve the basic problems, a range of goods, coincidence of wants, precious metals, perishable goods, any commodity or token, a monetary unit, the value of currency, a fixed amount of, difficult to counterfeit, evolve (into), in payment for, for this purpose, the gold standard, electronic payments.

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Ex. 3. Give three forms of the following verbs. Find the sentences with these

verbs in the text.

Become, begin, buy, find, get, give, grow, keep, let, make, overcome, pay, sell,

speak, spend, take, tell, understand, withstand.

Ex. 4. Match the words on the left with their definitions on the right.

Ex. 5. Find in the text the words which go in pair with: currency, barter, exchange, money, function, value, duplication. You can add other word collocations. Give examples either from the text or of your own.

Model: currency → national/international, local/foreign, weak/stable/hard currency, the single European currency

e.g. A stable currency means that your savings do not diminish in value. You can always convert euro into your local currency.

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7.Whatever the type of money, it should be judged ____ how well it performs its major functions.

8.In addition ____ these three functions of money, economists often point ____

the fourth criterion – to serve ____ a means of liquidity.

9.Money has a big advantage ____ other assets.

10.Debit cards used for purchases and transaction records could greatly reduce the need ____ cash, but paper currency still has the advantage ____ privacy.

11.The percentage of electronic payments is growing ____ these days.

12. We must admit that despite predictions of a “cashless society” relying ____

electronic payments, the demand ____ currency continues to grow.

Ex.8. Look through the text again and replace the words/phrases in italics

with similar ones.

1.First of all, money is the result of a long evolutionary process.

2.Apart from these three functions of money, economists often point out one more criterion - a means of liquidity.

3.In effect, money is what money does.

4.Actually, any commodity used as a medium of exchange is commodity money.

5.All things considered, it must be said that money can be any commodity or token used by society as a medium of exchange, a measure of value and a store of value.

6.And lastly, money units must be difficult to duplicate.

7.However, it is not only the physical durability of money that matters. Its social and institutional durability is also very important.

8.There are some general characteristics that are extremely important and necessary for whatever acts as money in a modern society.

9.An excellent example of fiat money is euro.

10.The percentage of money moved electronically is growing surprisingly these days.

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Ex.9. Choose and combine two parts logically to make complete sentences.

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1.До появи грошей був бартер, тобто, прямий безгрошовий обмін товарами.

2.Гроші - це будь-який товар або знак, що використовується суспільством як засіб обміну, міра вартості і засіб накопичення.

3.Щоб бути хорошим засобом обміну, гроші повинні бути легко впізнаваними, загальноприйнятими і зручними в користуванні, тобто бути подільними і легко переноситися з одного місця до іншого.

4.Як міра вартості, гроші служать в якості еталону для виміру вартості товарів і послуг.

5.Гроші виступають як засіб заощадження для використання в майбутньому, або як засіб накопичення багатства.

6.Щоб бути хорошим засобом накопичення, гроші повинні бути тривалого користування і мати більш-менш стабільну вартість.

7.У часи високої інфляції і політичної нестабільності гроші навряд чи можуть бути гарним засобом накопичення.

8.Гроші мають велику перевагу над іншими формами капіталу.

9.Це найбільш ліквідний капітал, оскільки вони повсюдно впізнавані і приймаються як єдина валюта.

10.Їх можна використовувати в будь-який момент для купівлі товарів і послуг, у той час як, для того щоб обміняти золото або діаманти на готівку, потрібен час і якісь зусилля.

LANGUAGE SKILLS

Ex.11. Ask questions to which the following may be answers.

1.Money overcomes the problems of a barter system and the need for a coincidence of wants.

2.Bartering doesn’t suit the needs of a modern, diversified economy, even though some bartering still goes on in the world today.

3.Money makes it easier to trade, borrow, save, and invest. It brings simplicity and organisation to our economy.

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