VII. Fill in the gaps in the following text:

backed; considerable; define; acceptable; money; status; currency; commodity; reveals; legal tender; medium of exchange; broad; accepted; supply

Money

Most of us use 1)_____every day. We see it, touch it, and spend it. But how many of us can 2)______it adequately? Usually money is defined too narrowly. Some define it as the 3) ______ of a nation: others think of it in terms of 4) ______ ; still others refer to it as the 5)______. Such definitions, however, automatically exclude large portions of our money. To include all segments of our money 6)______, we must use a 7)______definition. Thus, we can say that money is commonly 8)______in exchange for other goods and services.

9)______ money refers to the use of some commodity as money. Many

commodities - such as stones, shells, various crops, metal, and paper - have served as money in various countries of the world. American history 10)______that tobacco, corn, beads, warehouse receipts, and bank notes, in addition to metal coin and paper currency, have served as money. In fact, many of these monies were given the 11)______of legal tender, which means that they were 12)______for the payment of debts, both public and private.

There are two basic types of modern money, each of 13)______importance: token money and paper money. Token or metallic money consists of coins - a special type of commodity money in which a metal such as gold, silver or copper is used. Paper money takes the form of bills and notes. It may or may not be 14)______by gold or silver.

VIII. Give the terms for the following explanations.

1. Any generally accepted means of payment for the delivery of goods or the settlement of the debt.

2. The function of money whereby it enables the exchange of goods and services.

3. The function of money by which it provides a unit in which prices are quoted and accounts are kept.

4. The function of money by which it can be used to make purchases in the future.

5. An economy with no medium of exchange, in which goods are swapped for other goods.

6. A medium of exchange based on the debt of a private firm or individual.

7. Financial intermediaries with a government licence to make loans and issue deposits.

8. A means of payment whose value or purchasing power as money greatly exceeds its cost of production or value in uses other than money.

9. A set of arrangements in which debts between banks are settled, by adding up all the transactions in a given period and paying only the net amounts needed to balance inter­bank accounts.

10. The speed and certainty with which an asset can be converted into money.

11. In the time of the goldsmiths, the amount entrusted to the goldsmith for safekeeping.

IX. Say whether the following statements are true or false. Extend your ideas.

1. Cigarettes were used as money in the war.

2. Trading is expensive in a barter economy.

3. Money in current accounts in banks is legal tender.

4. If the goldsmiths insisted that all transactions were backed by equal amounts of gold in the vaults, then their actions could not cause growth in the money supply.

5. Banks are the only financial intermediaries.

6. The clearing system represents one way in which society reduces the costs of making transactions.

7. The more liquid an asset, the higher the return received.

8. The monetary base is the quantity of notes and coins in circulation with the non-bank private sector.

9. The more cash that the public wishes to hold, the higher is the money supply.

10. Building society deposits are so liquid that they ought to be included in the definition of money.